Loan-Deposit Interest Rate Gap Declines After 8 Months... Housing Loan Enters 3% Range

As the market interest rate continues to decline, both bank loan and deposit interest rates fell in April. As a result, the loan-deposit interest rate gap in the banking sector turned to a downward trend for the first time in 8 months. The drop in loan interest rates was larger than that of deposit rates.

The mortgage loan interest rate fell by nearly 0.20%p in a month, entering the 3% range for the first time in 7 months.

According to the 'Weighted Average Interest Rate of Financial Institutions for April 2025' statistics released by the Bank of Korea on the 27th, the loan-deposit interest rate gap based on new transactions recorded 1.48%p. It shrank by 0.04%p from the previous month (1.52%p), declining for the first time in 8 months. The balance-based loan-deposit interest rate gap also decreased from 2.25%p to 2.21%p by 0.04%p.

The household loan interest 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 interest rate fell from 4.17% to 3.98% by 0.19%p, and general credit loans fell from 5.48% to 5.28% by 0.20%p respectively. The 3% range mortgage loan interest rate is the first since September last year (3.74%) after 7 months.

The corporate loan interest rate (4.14%) also decreased by 0.18%p, continuing its decline for the fifth month. The interest rate drop for large companies (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 interest rate, combining household and corporate loans, also fell from 4.36% to 4.19% by 0.17%p in a month.

Minsoo Kim, head of the Financial Statistics Team at the Bank of Korea, explained, "The household loan interest rate decreased due to the decline in benchmark interest rates such as the 5-year bank bond and COFIX (Cost of Funds Index), and corporate loans fell as short-term interest rates such as the 91-day negotiable certificate of deposit (CD) or short-term bank bonds decreased."

eastcold@fnnews.com Dongchan Kim, Reporter