According to the Bank of Korea's "Weighted Average Interest Rates of Financial Institutions in August," released on the 30th, the lending rate at commercial banks (based on newly extended loans) stood at an annualized 4.4% in August, up 0.13 percentage point from July's 4.27%. Household loan rates rose 0.12 percentage point to 4.76% from 4.64%, while corporate loan rates climbed 0.1 percentage point to 4.3%.
Within household lending, mortgage rates rose 0.18 percentage point from the previous month to 4.66%. That marked a fourth straight monthly increase since May's 4.32% and the highest level since November 2022, when the rate stood at 4.74%. Fixed-rate mortgages rose 0.12 percentage point to 4.88%, extending gains to 11 consecutive months since October last year, when the rate was 3.97%. Floating rates rose 0.18 percentage point to 4.53%.
General unsecured household loan rates jumped 0.36 percentage point to 6.33% from 5.97%, breaching the 6% threshold. That is the highest level in two years and seven months, since January 2024's 6.38%.
Notably, while the share of borrowers opting for floating rates on household loans had been rising despite the upward rate trend, the share of fixed-rate loans increased in August. The fixed-rate share of household loans rose to 23.5% in August from 21% in July, turning higher for the first time in 13 months since August last year. The fixed-rate share of mortgages also rose 3.4 percentage points to 35.3% from 31.9% over the same period, reversing course for the first time in 10 months since November last year.
Floating rates are typically considered disadvantageous during periods of rising rates, but the share of borrowers choosing floating-rate loans had been increasing because the rates applied immediately are lower. As the increase in floating rates gathered pace, however, demand appears to have shifted to fixed rates from August.
Meanwhile, the savings deposit rate at commercial banks stood at 3.21% in August, unchanged from the previous month. As a result, the spread between lending and deposit rates widened to 1.19 percentage points from 1.06 percentage points in July.
