Banks' overall loan rates edged down in October amid the central bank's monetary easing, though mortgage rates climbed due to tighter lending regulations. Corporate loan rates fell for the fifth straight month, while household rates rose for the first time since December 2024. The changes reflect efforts to cool the overheated property market and curb household debt.
Data from the Bank of Korea (BOK) showed that the average interest rate on new bank loans stood at 4.02 percent in October, down 0.01 percentage point from September. By sector, the rate on corporate loans fell 0.03 percentage point to 3.96 percent, marking the fifth consecutive monthly decline. In contrast, the rate on new household loans rose 0.07 percentage point to 4.24 percent, the first increase since December 2024.
Home-backed mortgage loans increased by 0.02 percentage point to 3.98 percent, and jeonse loans also rose 0.02 percentage point to 3.78 percent. General credit loan rates fell 0.12 percentage point to 5.19 percent, but "the share of general credit loans, which carry relatively higher interest rates, expanded, leading to an overall rise in household loan rates," a BOK official said. Jeonse is a unique South Korean housing rental system in which tenants make a large lump-sum deposit fully returned at the end of the lease.
The uptick in mortgage rates stemmed from the government's stricter lending rules for home purchases aimed at cooling the overheated property market and reining in household debt, marking the first rise in 10 months.
Meanwhile, the average rate banks pay on fresh deposits climbed 0.05 percentage point to 2.57 percent, the second straight monthly gain. The spread between banks' outstanding lending and deposit rates narrowed 0.01 percentage point to 2.18 percentage points.
The BOK initiated its monetary easing cycle in October 2024, cutting the key rate by 0.25 percentage point to 3.25 percent and further to 2.5 percent to bolster economic growth. At its latest meeting last month, the central bank held the benchmark rate steady for a third consecutive time to protect financial stability amid rising household debt and uncertainties from U.S. tariff policies. The next policy meeting is scheduled for Thursday.
