Credit loan rates at South Korea's commercial banks have continued to climb, with rate hikes for high-credit borrowers exceeding those for low-credit borrowers, data showed.
According to the financial industry on the 3rd, the average interest rate on new credit loans extended in April by the country's five major banks — KB Kookmin, Shinhan, Hana, Woori and NH Nonghyup — stood at 5.14% per annum, up 0.29 percentage points from January's 4.85%. On a monthly basis, the rate rose for three consecutive months, reaching 4.93% in February and 5.03% in March.
The upward trend was most pronounced among high-credit borrowers. The average rate for top-credit borrowers, with credit scores between 1,000 and 951, climbed to 4.54% in April from 4.38% in January, a gain of 0.16 percentage points. For the 950-to-901 score bracket, the rate rose 0.16 percentage points to 4.95% from 4.79%. The 900-to-851 bracket posted the largest increase, climbing 0.20 percentage points to 5.48% from 5.28%.
In contrast, rates declined for low-credit borrowers. The average credit loan rate for the lowest-credit borrowers, with credit scores of 600 or below, fell to 8.07% in April from 8.89% in January. The 650-to-601 bracket dropped 0.40 percentage points to 7.64% from 8.04%. The 700-to-651 bracket remained virtually unchanged, at 7.43% in April compared with 7.42% in January.
At some banks, an inversion emerged in which average rates for borrowers with lower credit scores fell below those for mid-credit borrowers. The average credit loan rate Shinhan Bank extended to the lowest-credit borrowers in April was 7.40%, lower than the 7.58% applied to the 701-to-750 score bracket and the 7.87% applied to the 651-to-700 bracket. The impact of rising market interest rates was reflected more clearly in the high-credit borrower brackets. The yield on one-year bank debentures, which serves as a benchmark for credit loan pricing, rose 0.205 percentage points to 3.176% at the end of April from 2.971% at the end of January. "Loans to low-credit borrowers often include products designed as policy financing or financial support for low-income earners, making it difficult for rising market rates to be passed through directly," an official at a commercial bank said.
