Loan interest rates are skyrocketing to record highs as restrictions continue to limit the amount of loans.
The average annual interest rate on new unsecured loans in November was 5.16% according to the Bank of Korea (BOK), up 0.54 percentage point on the month. This figure is the highest since 5.29% in September 2014 and the first time it has exceeded 5% since October 2014.
Mortgage interest also skyrocketed, increasing 0.25 percentage points in one month to 3.51%. Interest is the highest since 3.54% in July 2014.
Interest on new loans to households was 3.61% on average, up 0.15 percentage points on the month and the highest since December 2018.
“The interest on loans to households has increased due to the increase in the benchmark interest rate and is also influenced by the increase in the interest margin of banks to control household debt,” said Song Jae -chang, head of the BOK financial statistics team.
“People with high credit are limited to borrowing only up to their annual income limit, and the average interest on unsecured loans has increased as more loans are given to people with average to low credit levels. ”
In August, the Financial Supervisory Service asked banks to limit the limit on unsecured loans to match borrowers’ annual income, and many banks have followed the move.
People received an average of 1.57% interest on all new deposits, up 0.28 percentage points from the month. New term deposits bore interest at 1.51%, up 0.23 percentage points, the highest since January last year.
Banks increased interest on deposits and savings by a higher margin or similar to the increase in the policy rate, as many criticized that banks were increasing interest on loans too much, but not by much on loans. deposits. The policy rate rose 0.25 percentage points to 1% in November.
There was a 1.66 percentage point difference between new interest on deposits and interest on loans, reducing the difference by 0.12 percentage point on the month.
Although interest on loans has increased, many have chosen to borrow at a variable interest rate that changes periodically based on economic conditions.
Of the total loans to households in November, 82.3% chose to borrow at variable interest rates, up 3 percentage points for the month.
“There has been a decrease in mortgages, which account for a large portion of fixed-interest loans, and the number of people borrowing at fixed interest has declined,” BOK’s Song said.
BY AHN HYO-SUNG, LEE TAE-HEE [[email protected]]