South Korean banks keep home loan rates high amid debt management

South Korean banks are keeping additional interest rates on home loans at elevated levels as they tighten control over household debt. The average additional rate for new fixed-rate home loans with maturities over 10 years reached 3.27% in June, a 0.04 percentage point increase from May, according to data from the Banks Association of Korea. This marks the highest level since statistics began in July 2019.

Banks calculate final loan rates by adding an "additional rate" to a base rate, with the additional rate reflecting operational costs, legal expenses, and risk premiums. NH Nonghyup Bank had the highest additional rate at 3.93%, followed by Hana Bank (3.50%), Woori Bank (3.36%), KB Kookmin Bank (3.13%), and Shinhan Bank (2.41%).

Despite the higher additional rates, the average interest rate spread between loans and deposits for these home loans slightly decreased to 1.48% in June from 1.56% in May. A bank official explained that while additional rates were kept high to curb home lending amid total debt management, the spread narrowed due to rising deposit rates. Shinhan Bank's average loan rate was 5.00%, followed by KB Kookmin (4.63%), Woori (4.32%), Nonghyup (4.28%), and Hana Bank (4.26%).

“

We have maintained high additional interest rates on home loans as part of our efforts to manage household debt volumes.