[E-Daily Reporter Jang Young-eun ] Last month, while commercial banks’ lending rates continued to rise, interest rates on time deposits and savings accounts began to fall, causing the spread between deposit and lending rates to widen again for the first time in seven months. This occurred as the Bank of Korea raised its benchmark interest rate by 0.25 percentage points in both July and August, yet only deposit and savings account rates declined.

According to the weighted average interest rates for financial institutions in August released by the Bank of Korea on the 30th, the interest rate on pure savings deposits fell to 3.14% annually, down 0.02 percentage points from the previous month, marking the first decline in five months. Interest rates on time deposits fell from 3.15% to 3.14%, while rates on installment savings accounts dropped from 3.99% to 3.72%. In contrast, the loan interest rate rose by 0.13 percentage points from the previous month to 4.40% per annum.

The interest rate on savings deposits at commercial banks, based on new deposits, remained unchanged from the previous month at 3.21% per annum. Although rates on time deposits and savings accounts fell, rates on market-based financial products, such as negotiable certificates of deposit (CDs), rose by 0.05 percentage points to 3.53% per annum.

As loan rates rose and deposit rates remained flat, the spread between deposit and loan rates—based on new transactions—widened by 0.13 percentage points to 1.19 percentage points compared to the previous month (1.06 percentage points), marking the first expansion in seven months since February of this year.

Kim Seong-jun, head of the Bank of Korea’s Financial Statistics Team, stated, “The decline in deposit rates last month was due to a specific factor: a particular bank attracting large-scale short-term funds from local governments into low-interest fixed-term deposits,” adding “As for savings accounts, the weighted average interest rate for fixed-term savings accounts rose significantly in July due to strong deposits into the ‘Youth Future Savings Account,’ which offers high interest rates. This created a base effect, contributing to the decline in August’s interest rates compared to the previous month,” he explained.

He continued, “Last month, deposit rates rose while loan rates fell. Although there are monthly fluctuations, from a long-term perspective, market interest rates have been steadily rising since the second half of last year, leading to an upward trend in financial institutions’ deposit and loan rates.”

In August, loan rates for both households and businesses rose, reflecting increases in short-term market interest rates. The interest rate on household loans rose by 0.12 percentage points to 4.76% per annum. Mortgage rates rose by 0.18 percentage points to 4.66% per annum, and rates on general unsecured loans also surged by 0.36 percentage points to 6.33% per annum. Corporate loan rates also rose by 0.10 percentage points to 4.30% per annum, with rates for small and medium-sized enterprises (SMEs) (4.38% per annum) and large corporations (4.21% per annum) increasing by 0.16 and 0.03 percentage points, respectively.

Household loan rates reached their highest level in 21 months, since November 2024 (4.79%). Mortgage rates reached their highest level in 45 months since November 2022 (4.74%), while unsecured loan rates hit their highest level in 31 months since January 2024 (6.38%). It appears that rising interest rates are increasing the interest burden on households.

Compared to the end of last year, interest rates on savings deposits rose by 0.31 percentage points to 2.90% per annum, while lending rates increased by 0.21 percentage points to 4.19% per annum. Overall, deposit rates rose more than loan rates, but household loan rates increased by 0.41 percentage points, from 4.35% per annum at the end of last year to 4.76% per annum in August of this year. Mortgage rates, which account for a large share of household loans, also rose by 0.43 percentage points, from 4.23% per annum to 4.66% per annum.

As loan rates trended upward, the proportion of borrowers choosing fixed rates in the new loan market increased. Last month, the share of fixed-rate mortgages reached 35.3%, up 3.4 percentage points from the previous month (31.9%), marking a rebound after 10 months. The share of fixed-rate loans among total household loans also rose to 23.5%, up 2.5 percentage points from the previous month, marking the first increase in 13 months.

Meanwhile, the weighted average interest rate is calculated by weighting the interest rates on deposit and loan transactions actually processed by financial institutions over the course of a month according to the transaction amounts (proportions). As an indicator, it provides a clearer picture of how much money moved at what interest rates in the actual market than a simple average; in particular, the weighted average interest rate based on new loan volume is the most sensitive to recent interest rate trends.