Bank household lending rates gained by their fastest pace in nine months in October to reach a 33-month high as market yields jumped on expectations that the Bank of Korea could raise the policy rate within the year.
According to Bank of Korea (BOK) data on Monday, bank lending rates on new household loans in October rose by 9 basis points on month to an average of 3.5 percent, the highest since January 2015 with 3.59 percent. The month-over-month increase is also the largest since January this year when it added 10 basis points.
Interest rates on mortgage-backed loans averaged at 3.32 percent, up 8 basis points from a month earlier. Interest rates on collective loans for a new apartment buyer jumped 24 basis points to 3.38 percent.
Lending rates on both unsecured and secured personal loans were up 13 basis points and 8 basis points, respectively, from a month earlier as low-credit borrowers rushed to get fresh loans ahead of the anticipated BOK’s rate hike as early as end of November.
The market has been betting on a lifting in the base rate at the upcoming monetary policy meeting on Thursday after the economy grew by a faster-than-expected pace of 1.4 percent in the third quarter ended September. The BOK also cannot put off the raise any longer as the U.S. Federal Reserve is expected to raise the Fed fund rates in December which could place them above the Korean counterpart.
Meanwhile, average interest rates on business loans fell by 3 basis points to 3.45 percent in October. The fall in business lending rates was largely due to interest rates on loans for small and medium-sized businesses that fell by 2 basis points to 3.67 percent. Lending rates on loans for large-sized businesses, however, increased 1 basis point to 3.11 percent.
By Kim In-oh and Cho Jeehyun
[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]