Lending rates skyrocket and hit record highs as restrictions continue to restrict lending.

The average annual interest rate for new unsecured loans was 5.16 percent in November, according to the Bank of Korea (BOK), 0.54 percentage points more than in the previous month. The value is the highest since 5.29 percent in September 2014 and exceeded 5 percent for the first time since October 2014.

Mortgage rates also rose sharply, increasing by 0.25 percentage points to 3.51 percent compared to the previous month. At 3.54 percent, the interest rate is the highest since July 2014.

Interest on new household loans averaged 3.61 percent, 0.15 percentage points more than in the previous month and the highest level since December 2018.

“The interest rate on household loans has risen due to the increase in the reference rate and is also influenced by the fact that the banks increase their interest rate spreads in order to restrain household debts,” said Song Jae-chang, head of the BOK’s finance statistics team.

“People with high creditworthiness are only allowed to borrow within their annual income, and the average interest rate on unsecured loans rose as more were loaned to people with medium to low credit levels.”

The Financial Regulator urged banks in August to cap the unsecured loan cap on borrowers’ annual income, and many banks have pursued the move.

People received an average of 1.57 percent interest on all new money, 0.28 percentage points more than a month. Interest on new time deposits was 1.51 percent, an increase of 0.23 percentage points, the highest value since January last year.

Banks have raised deposit and savings rates by a margin higher or similar to the rate hike, as many have criticized banks for raising lending rates too much, but not too much for deposits. The key interest rate rose by 0.25 percentage points to 1 percent in November.

There was a 1.66 percentage point difference between the new deposit rate and the loan rate, down 0.12 percentage point from the previous month.

Although lending rates have risen, many have chosen to borrow at a floating rate that changes periodically depending on the economic climate.

Of the total household loans in November, 82.3 percent opted for variable-rate loans, an increase of 3 percentage points on the previous month.

“The mortgage loans, which make up a large part of fixed-rate loans, have declined, and the number of people who take out fixed-rate loans has declined,” said the BOK’s Song.

BY AHN HYO-SUNG, LEE TAE-HEE [[email protected]]