Mortgage rates at banks rose for the second consecutive month in June, reaching their highest level in two years and seven months. The increase in credit loan rates is also adding to household interest burdens. Analysts suggest that the trend of rising loan rates may accelerate in the second half of the year, considering that the recent rate hike by the Bank of Korea in July has not yet been reflected in these figures.
According to the Bank of Korea's 'Weighted Average Interest Rate' statistics released on July 28, the weighted average mortgage rate for new loans at deposit banks was recorded at 4.36% in June, up 0.04 percentage points from April's 4.32%. This is the highest rate since November 2023, when it was 4.48%.
Specifically, the fixed-rate mortgage interest rose to 4.53%, an increase of 0.09 percentage points from the previous month. This marks the ninth consecutive month of increases since October of last year, when it was 3.97%. The rise is attributed to increases in benchmark rates such as bank bonds and the government-backed mortgage rate. The average rate for five-year bank bonds (AAA, non-guaranteed) was 3.715% at the end of January but has been rising since surpassing 4% at the end of March. The variable-rate mortgage interest also increased by 0.04 percentage points to 4.27%.
The increase in general credit loan rates was even more pronounced. The rate for general credit loans rose from 5.49% in May to 5.72% in June, a jump of 0.23 percentage points.
The overall household loan rate increased to 4.50%, up 0.04 percentage points from the previous month, while the combined loan rate for households and businesses rose by 0.12 percentage points to 4.31%.
As fixed-rate mortgage rates soar, the proportion of borrowers opting for fixed-rate loans has decreased. In June, the share of fixed-rate mortgages among new loans fell to 37.7%, a decrease of 3.9 percentage points in just one month. This marks the lowest level since February 2014, when it was 31.8%, and the share has been declining for eight months since November 2022, when it was 90.2%.
The proportion of fixed-rate loans among all household loans also dropped from 24.6% to 22.7%, a decline of 1.9 percentage points. This is the smallest share in nearly four years, since July 2022, when it was 21.4%. In contrast, the share of variable-rate loans increased from 58.4% in May to 62.3% last month.
Lee Hye-young, head of the Bank of Korea's Financial Statistics Team, stated, "As long as variable rates remain lower than fixed rates, many borrowers are choosing the lower option. However, with the recent rate hikes affecting short-term rates that influence variable rates, the gap may narrow, potentially leading to an increase in the share of fixed-rate selections over time."
* This article has been translated by AI.
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