Loan-Deposit Interest Rate Gap Falls After 8 Months... Mortgage Rate Drops to 3% After 7 Months

[Financial News] As the market interest rate decline continues, both bank loan and deposit rates fell in April. As a result, the loan-deposit interest rate gap in the banking sector turned downward for the first time in 8 months. This is due to the larger decrease in loan rates compared to deposit rates.
The mortgage loan rate fell by nearly 0.20%p in one month, entering the 3% range for the first time in 7 months.
The Bank of Korea announced on the 27th that according to the 'April 2025 Weighted Average Interest Rate of Financial Institutions' statistics, the loan-deposit interest rate gap based on new transactions recorded 1.48%p. It decreased by 0.04%p from the previous month (1.52%p), marking a decrease for the first time in 8 months. The balance-based loan-deposit interest rate gap also fell from 2.25%p to 2.21%p, a decrease of 0.04%p.
The household loan rate of deposit banks (based on new transactions) last month was 4.36% per annum, down 0.15%p from the previous month (4.51%). It has been on a downward trend for 5 consecutive months since December last year (4.72%).
Among household loans, the mortgage loan rate fell from 4.17% to 3.98%, a decrease of 0.19%p, and general credit loans fell from 5.48% to 5.28%, a decrease of 0.20%p. The 3% mortgage loan rate is the first since September last year (3.74%).
The corporate loan rate (4.14%) also decreased by 0.18%p, continuing its downward trend for 5 months. The rate of decrease for large corporations (4.04%) and small and medium-sized enterprises (4.24%) was recorded at 0.28%p and 0.07%p, respectively. The overall bank loan rate, combining households and corporations, also fell from 4.36% to 4.19% in one month, a decrease of 0.17%p.
Minsoo Kim, a team leader at the Bank of Korea's Financial Statistics Team, explained, "The household loan rate decreased due to the decline in benchmark rates such as the 5-year bank bond and COFIX, while corporate loans decreased due to the fall in short-term rates such as the 91-day negotiable certificate of deposit (CD) and short-term bank bonds."
The savings deposit rate of deposit banks (based on new transactions) also decreased from 2.84% to 2.71% per annum due to the influence of the market interest rate decline, a decrease of 0.13%p. Although it has been on a downward trend for 7 consecutive months since October last year, the decrease was not as large as the loan rate. The pure savings deposit rate (2.71%) and the market-type financial product rate (2.69%) for financial bonds and CDs decreased by 0.12%p and 0.20%p, respectively.
The deposit rates of financial institutions other than banks (based on 1-year term deposits and deposits) fell by 0.08%p and 0.09%p at credit cooperatives (3.21%) and Saemaul Geumgo (3.22%), respectively, but remained unchanged at mutual savings banks (2.98%) and mutual finance (3.06%). In terms of loan rates, △mutual savings banks (10.72%, -0.13%p), credit cooperatives (5.01%, -0.05%p), and mutual finance (4.70%, -0.15%p) decreased, while Saemaul Geumgo (4.75%, +0.14%p) increased.

eastcold@fnnews.com Dongchan Kim Reporter