Last month, the fixed mortgage rates offered by banks surpassed 5% for the first time in history. The increase in market interest rates, driven by the rise in the benchmark rate, has led to a continuous upward trend in mortgage rates for five consecutive months. As interest rates for credit loans and jeonse loans also rise, the burden on households is increasing.
According to the Bank of Korea's 'Weighted Average Interest Rates of Financial Institutions' released on the 29th, the fixed mortgage rate for September was 5.11%, up 0.23 percentage points from the previous month. This is the highest level since the Bank of Korea began separating fixed and variable mortgage rates in January 2013. The fixed mortgage rate has risen for 12 consecutive months since October of last year.
The overall mortgage rate increased to 4.88%, up 0.22 percentage points from the previous month, marking five consecutive months of increases since May (4.32%). The variable mortgage rate also rose to 4.76%, up 0.23 percentage points, continuing its upward trend for four months.
The primary reason for the rising rates is the increase in market interest rates, including bank bonds. Last month, the five-year bank bond rate rose from 4.35% to 4.53%, an increase of 0.18 percentage points. The three-month and six-month bank bond rates also rose by 0.25 and 0.29 percentage points, respectively.
Kim Sung-jun, head of the Bank of Korea's Financial Statistics Team, stated, "From October of last year to September of this year, the five-year bank bond rate increased by 1.54 percentage points, while the fixed mortgage rate rose by 1.46 percentage points. We believe that the rise in bank bond rates has been significantly reflected in the mortgage rates." He added that the increase in the housing loan rate, which has risen a total of 1.25 percentage points over five adjustments until July this year, has also had an impact.
The interest rate for general credit loans rose to 6.49%, up 0.16 percentage points from the previous month, marking four consecutive months of increases since June. The interest rate for jeonse loans also increased from 4.35% to 4.57%, up 0.22 percentage points. Consequently, the overall household loan interest rate rose to 4.96%, an increase of 0.20 percentage points from the previous month.
The proportion of fixed-rate loans among household loans increased to 24.0%, up 0.5 percentage points from the previous month, marking two consecutive months of growth. In contrast, the proportion of fixed-rate mortgages decreased to 34.2%, down 1.1 percentage points.
Corporate loan rates also rose from 4.30% to 4.49%, an increase of 0.19 percentage points. Large corporate loan rates increased to 4.37%, up 0.16 percentage points, while small and medium-sized enterprise loan rates rose to 4.63%, up 0.25 percentage points. The relatively larger increase in small and medium-sized enterprise loan rates was influenced by the rise in short-term benchmark rates. The increase in large corporate loans was limited due to an increase in low-interest loans offered by some banks.
The interest rate for savings deposits rose to 3.45%, up 0.24 percentage points from the previous month. As the increase in deposit rates outpaced that of loan rates, the interest rate spread based on new transactions narrowed from 1.19 percentage points to 1.12 percentage points, a decrease of 0.07 percentage points.
However, there are indications that the upward trend in mortgage rates may slow or even decline in October. As of October 23, the five-year bank bond rate had decreased by 0.16 percentage points, and the housing loan rate has remained unchanged since August.
Kim noted, "Since the five-year bank bond rate has fallen in October, if the trend in benchmark rates continues, there is a possibility that loan rates may decrease. However, adjustments in banks' spreads will also have an impact, so we need to monitor the movements of benchmark rates until the end of the month."
* This article has been translated by AI.
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