Bank of Korea’s “Weighted Average Interest Rates of Financial Institutions for July 2026”
Gap Between Fixed and Variable Mortgage Rates Widens to 0.41 Percentage Points
Share of Fixed-Rate Mortgages Among New Loans Falls to 31.9%
The average interest rate on mortgage loans offered by banks has risen to 4.48%. This is the highest level in two years and eight months since November 2023 (4.48%). With fixed-rate mortgage rates climbing for ten consecutive months, the gap between fixed and variable rates has widened to 0.41 percentage points.
According to the ‘Weighted Average Interest Rates of Financial Institutions for July 2026’ released by the Bank of Korea on August 26, the mortgage loan rate (based on newly issued loans) at deposit banks last month reached an annual rate of 4.48%, up 0.12 percentage points from the previous month. This marks the third consecutive month of increase.
The gap between fixed and variable mortgage rates grew further from 0.26 percentage points in the previous month to 0.41 percentage points last month. The fixed mortgage rate rose to 4.76% per year, a 0.23 percentage point increase from the previous month. This is the tenth consecutive month of growth since October last year (3.97%). While the variable rate (4.35%) continued to increase for the second consecutive month, the magnitude of the increase (0.08 percentage points) was smaller than that of fixed rates.
Kim Sungjun, head of the Financial Statistics Team at the Economic Statistics Department 1 of the Bank of Korea, explained, “This is due to the rise in benchmark interest rates, such as five-year bank bonds and the Bogeumjari Loan rate.” The five-year (AAA-rated) bank bond rate rose by 0.07 percentage points, from 4.32% in June to 4.39%.
The proportion of variable-rate mortgages, which have lower interest rates, increased, while the share of fixed-rate mortgages decreased. Within mortgage loans, the proportion of fixed-rate loans fell by 5.8 percentage points from the previous month to 31.9%, marking the lowest level since February 2014 (31.8%).
The interest rate on jeonse (lump-sum rental deposit) loans rose by 0.12 percentage points to 4.19% per year. The rate for general credit loans increased by 0.25 percentage points month-on-month to 5.97%, the highest since December 2024 (6.15%). This increase was attributed to the rise in benchmark short-term bank bond rates as well as a higher proportion of loans to mid- and low-credit borrowers at some banks. Including these, the interest rate for total household loans climbed by 0.14 percentage points to 4.64% per year compared to the previous month.
The interest rate for corporate loans fell by 0.07 percentage points month-on-month to 4.20% per year. The rate for large corporations increased marginally by 0.01 percentage points to 4.18% per year, whereas the rate for small and medium-sized enterprises declined by 0.16 percentage points to 4.22%. Kim explained, “While the interest rate for large corporate loans saw a minor increase due to the rise in short-term rates, small and medium-sized enterprise loan rates fell as banks offered preferential rates to expand business lending and some introduced special low-rate loan products.”
The interest rate on time deposit savings products rose by 0.13 percentage points to 3.21% per year compared to the previous month, driven by increases in instruments such as term deposits (up 0.13 percentage points). By category, pure savings deposit rates climbed by 0.14 percentage points to 3.16% per year. The interest rate for market-based financial products, centered around financial bonds (up 0.16 percentage points), also increased by 0.12 percentage points to 3.48%.
The loan-deposit interest rate spread (based on new loans) was 1.06 percentage points, narrowing by 0.17 percentage points from the previous month. This marks the sixth consecutive month of decline since February (1.43%). On a balance basis, the spread decreased by 0.05 percentage points from the previous month to 2.22 percentage points.
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Except for credit unions and mutual savings banks, all non-bank financial institutions saw their one-year term deposit interest rates increase, with the exception of Saemaeul Geumgo, which saw a decrease of 0.05 percentage points. For lending rates (based on general loans), mutual savings banks rose by 1.03 percentage points, credit unions by 0.14 percentage points, and Saemaeul Geumgo by 0.48 percentage points, while mutual finance institutions saw a decrease of 0.15 percentage points.
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