![\"null](\"https:\/\/www.europesays.com\/korea\/wp-content\/uploads\/2026\/08\/news-g.v1.20260809.a35f7f331e4b4f23925562acc32f282d_P1.jpg\"\/ "\\"Korea")
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Household loan rates in South Korea rose about 0.5 percentage points over the past year even while the Bank of Korea kept its base rate unchanged, driven by global monetary tightening and domestic lending restrictions. Market watchers say rising bond yields in major economies, combined with the authorities’ continued caps on total lending, are increasing the burden on small and mid-sized businesses and on people buying homes to live in.<\/p>\n
The BOK cut its base rate to 2.5% from 2.75% last May and held it there through July of this year, according to the financial industry on the 9th. The policy rate was frozen for about a year.<\/p>\n
Commercial bank rates, however, climbed over the same period. The average rate on new loans to small and mid-sized businesses at deposit-taking banks rose to 4.38% in June this year from 4.17% last May, a gain of 0.21 percentage points, BOK data showed. Because the central bank cut its base rate at the end of last May, the increase means lending rates were pushed higher by external factors over roughly a year.<\/p>\n
Household loans rose more sharply. The average rate on new mortgages was 3.87% last May but climbed to 4.36% in June this year. The rate on unsecured personal loans also jumped to 5.72% from 5.21% over the same period. Each rose by about 0.5 percentage points.<\/p>\n
Industry analysts attribute the increases to a combination of rising global rates and lending restrictions. The 10-year U.S. Treasury yield, at about 4.4% at the end of last May, rose to around 4.48% by the end of June and briefly topped 4.7% last month. Japan’s 10-year government bond, which had hovered around 1.5% at the end of last May, jumped into the 2.7% range by the end of June. Rising sovereign yields in major economies affect Korea as well \u2014 much the way prices at a well-trusted neighboring store influence those nearby.<\/p>\n
The issue is the curbs on household lending. Household loan rates at domestic banks rose more than corporate rates. While rates on riskier loans to small and mid-sized firms rose 0.21 percentage points, mortgage and unsecured loan rates climbed 0.5 percentage points.<\/p>\n
The gap is even clearer in rates on loans to large companies. The average rate on new loans to large firms was 4.15% last May and rose just 0.02 percentage points, to 4.17%, in June this year.<\/p>\n
Industry officials say this gap stems from banks’ lending restrictions. Financial regulators lowered the mortgage ceiling to 600 million won through the “June 27 measures” last year. They then tightened it further through the “October 15 measures,” capping mortgages at 200 million won for homes priced above 2.5 billion won, 400 million won for homes between 1.5 billion and 2.5 billion won, and 600 million won for homes under 1.5 billion won. KB Kookmin Bank has cut its own ceiling all the way to 300 million won. In particular, as the government has applied strict caps on total household lending this year, as it did last year, banks that have exceeded their loan quotas are raising rates to reduce demand.<\/p>\n
As of the 6th, the balance of household loans, excluding policy loans, at the five major banks \u2014 KB Kookmin, Shinhan, Hana, Woori and NH Nonghyup \u2014 stood at 650.3766 trillion won, according to the financial sector. That is 5.4005 trillion won more than the 644.9761 trillion won recorded at the end of last year. The five banks’ combined target for household loan growth this year is 4.33 trillion won, meaning they have already overshot it by more than 1 trillion won. As a result, banks are effectively blocking non-face-to-face mortgages and loans arranged through brokers.<\/p>\n
For unsecured loans, banks are capping borrowing at a borrower’s annual salary, limiting overdraft lines to 50 million won and raising rates in response. “As the financial authorities tighten household lending, banks have no choice but to respond by reducing loan amounts or raising loan rates,” an official in the financial sector said. “We can’t turn away everyone who comes in for a loan, so we adjust demand by raising rates.”<\/p>\n
What matters is the burden on low- and middle-income households and on people buying homes to live in. With external factors and household lending curbs at play, the base rate has stayed the same yet borrowers have been left with a heavier interest burden. “It’s not easy to pinpoint exactly what is driving the higher interest burden, but it’s hard to deny that banks have raised rates amid the total lending caps,” a commercial bank official said.<\/p>\n","protected":false},"excerpt":{"rendered":"Household loan rates in South Korea rose about 0.5 percentage points over the past year even while the…\n","protected":false},"author":2,"featured_media":113707,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[20989,5177,31,58477,58476,46615,58475,14369],"class_list":["post-113706","post","type-post","status-publish","format-standard","has-post-thumbnail","category-korea","tag-bank-of-korea-base-rate","tag-kb-kookmin-bank","tag-korea","tag-lending-caps","tag-mortgage-rate","tag-small-business-loans","tag-south-korea-household-loans","tag-u-s-treasury-yields"],"_links":{"self":[{"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/posts\/113706","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/comments?post=113706"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/posts\/113706\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/media\/113707"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/media?parent=113706"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/categories?post=113706"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/tags?post=113706"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}