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Thu, February 3, 2022 | 12:24
Economy
Bank lending rate highest in nearly 3 years
Posted : 2017-11-27 16:39
Updated : 2017-11-27 17:18
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By Yoon Ja-young

The bank lending rate for new household loans rose to the highest level since 2015 in October. This is expected to weigh on households whose debt is snowballing to record highs.

According to the Bank of Korea, the annual interest rate that local banks levy for new household loans averaged 3.5 percent in October, up from 3.41 percent a month ago. This is the highest level since the rate was 3.59 percent in January 2015.

The rise reflects soaring market rates. Interest rates on three-year bank bonds rose to 2.24 percent in October from 1.99 percent in the previous month.

The rising interest rates are expected to weigh on households, following government measures to control loans. With household debt surpassing a record-high 1,400 trillion won, marking a 2.2 percent increase in the third quarter, the government announced tougher regulations on loan-seekers including the adoption of a new debt-to-income (DTI) ratio.
This restricts the loan amount a person can get according to their income. According to an example cited by the Financial Services Commission, those with an annual income of 70 million won currently having a mortgage under 180 million won could get an additional 389 million won to buy another apartment, but under the new DTI regulation, they can only get an extra 184 million won.

The government expects the stronger regulations will help stabilize housing prices as well as control household debt.

According to the central bank, interest rates on mortgages also rose to their highest levels. Banks levy an average 3.32 percent interest on mortgages, up from 3.24 percent the month before.

Collective loans are not an exception. Interest rates on collective loans, usually offered to those purchasing new apartments, stood at 3.38 percent, up from 3.14 percent the previous month.

The interest rates on credit loans, which fell to below 4 percent for the first time in August, have risen for two consecutive months since then. Local banks offered low interest rates to compete with Internet-only banks back then, but they rose to 4.22 percent last month.

Interest rates on corporate loans, meanwhile, fell to 3.45 percent from 3.48 percent the previous month.

The interest rates on new deposits, meanwhile, almost stood still at 1.63 percent. The gap between interest rates on deposits and loans, which reflects banks' profitability, stood at 2.27 percent.


Emailyjy@ktimes.com Article ListMore articles by this reporter



 
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