Bank mortgage rates drop below 3% on falling market rates

[Photo by Yonhap]

The lower end of a fixed mortgage rate has dropped to below 3 percent despite multiple increases under government pressure to manage household debt.

According to Shinhan Bank on Tuesday, the interest rate for its 5-year fixed-rate mortgage product stood at 2.94-4.95 percent, down 0.06 percentage point from the previous day‘s 3.00-5.01 percent.

The lower end rate of this product was in the 3 percent range at the end of July after multiple increases due to government pressure.

However, the rate dropped back to the 2 percent range on lower market interest rates and financial bond rate, which is the benchmark for loans.

Shinhan Bank plans to raise the mortgage rate by 0.3 percentage point on Wednesday, pushing it back to the 3 percent range.

On Monday, Woori Bank announced it would raise the mortgage rate by up to 0.4 percentage point, marking the fifth adjustment since July.

Amid falling market interest rates triggered by expectations on potential rate cuts in the second half of the year, the government is pressuring banks to manage household debt.

However, these measures are failing to keep up with the market, resulting in challenges in household debt management, insiders noted.

With the continued decline in financial bond rates and increasing demand for home purchases, the number of people seeking loans continues to rise. In June, the mortgage balance of the five major commercial banks—KB Kookmin Bank, Shinhan Bank, Hana Bank, Woori Bank, and NH Bank—increased by 5.85 trillion won ($4.24 billion), the largest increase since October 2021.

In July, the balance increased by 7.6 trillion won, the largest increase since the banks began compiling related statistics.