Household loan rates have been falling for six months, dropping to the low 4% range. Mortgage rates have declined for four consecutive months. This is due to the decrease in benchmark rates, which has affected indicator rates such as bank bonds and the Cost of Funds Index (COFIX).
According to the 'April average interest rates of financial institutions' announced by the Bank of Korea on the 27th, the household loan rate for new transactions by deposit banks last month was recorded at 4.26%, a decrease of 0.10 percentage points from the previous month. This marks six consecutive months of decline since December last year (4.72%·-0.07p).
All components of household loans, including mortgage loans, leasehold funds loans, and general credit loans, have decreased. The mortgage rate dropped by 0.11 percentage points to 3.87%, marking a decline for four consecutive months since February (-0.04p·4.23%).
The leasehold funds loan rate decreased by 0.11 percentage points to 3.70%, while the general credit loan rate was recorded at 5.28%, down 0.07 percentage points. Both rates have fallen for six consecutive months since December last year (4.34%·-0.09p, 6.15%·-0.02p, respectively).
The decrease in household loan rates is influenced by the decline in indicator rates. Last month, the COFIX (new) was 2.63%, down 0.07 percentage points from the previous month, and the Certificate of Deposit (91 days) fell to 2.67%, a decrease of 0.07 percentage points. The five-year bank bond (AAA) decreased by 0.03 percentage points to 2.77%.
In contrast, the corporate loan rate increased by 0.02 percentage points to 4.16%. This marks a turnaround to an increase after six months since December last year (4.76%·+0.05p). Although the loan rate for small and medium-sized enterprises decreased (4.24%→4.17%), the rate for large corporations increased significantly (4.04%→4.15%). The rise in large corporate loans is attributed to the conclusion of the low-interest policy loan that supported semiconductor investment in April.
Last month's savings interest rates of deposit banks (based on new transaction amounts) dropped by 0.08 percentage points to 2.63% annually. This continued a decline for eight months since October last year (3.37%·-0.03p). Pure savings deposits such as time deposits (2.64%) and market-based financial products such as CD (2.58%) each decreased by 0.07 percentage points and 0.11 percentage points, respectively.
The interest rate spread between loans and deposits (loan rate - deposit rate) widened by 0.06 percentage points to 1.54%. The interest rate spread expanded a month after narrowing in April (1.48%·-0.04p). However, the balance-based interest rate spread decreased by 0.02 percentage points from the previous month to 2.19 percentage points, continuing its downward trend.
Kim Min-soo, head of the financial statistics team at the Bank of Korea's Economic Statistics Division, noted that "the expansion of the interest rate spread for new transaction amounts is due to the significant increase in corporate loan rates last month," adding that "future trends will be influenced by the banks' additional charges and recently announced measures to strengthen household loan management."
Among non-bank financial institutions, interest rates for deposits have fallen, excluding mutual savings banks (unchanged). The decline was largest in mutual finance (2.88%·-0.18p), followed by credit cooperatives (3.12%·-0.09p) and Saemaul Geumgo (3.14%·-0.08p). For loan rates, all except credit cooperatives (4.99%·-0.02p) increased. Mutual savings banks (10.92%·+0.20p) saw the largest increase, followed by mutual finance (4.86%·+0.16p) and Saemaul Geumgo (4.79%·0.04p).