Average annual interest rate of mortgage rises over 3%

The average mortgage interest rate of banks has seen an increase by the largest margin in four years and 10 months to over three percent. It is the result of the Bank of Korea raising the base rate and strengthening regulations on household loans, which led to reduced prime rates and increased additional rates by banks. As the interest rates of credit loans rose over four percent, the interest burden of borrowers will further increase.

According to the Bank of Korea on Friday, banks’ average annual interest rate of mortgage was 3.01 percent as of September. It is the first time in 2.5 years since March 2019 that the interest rate exceeded three percent. The interest rate increased by 0.13 percentage points in one month, which is the largest increase since November 2016. The general credit loan interest rate also rose by 0.18 percentage points from the previous month to 4.15 percent, exceeding four percent for the first time in two years and three months.

“The base rate rise in August was reflected on market rates and banks reduced prime rates to manage household loans,” said Song Jae-chang, the financial statistics team leader at the Bank of Korea,. “According to the financial authorities’ additional regulations on household loans, household loan interest rates may further increase due to the reduction of prime rates and increase of additional rates.” As loan rates sharply increased this month, the highest annual mortgage rate of banks has exceeded five percent.


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