Household loan interest rates remain at 4% level, showing no signs of budgeting... ”Is it really time for an interest rate cut?” - South Korean media

The Bank of Korea will announce bank loan and deposit interest rates for March next week. Although interest rates for household loans have fallen as the base interest rate has been reduced, consumers are unlikely to feel a big difference.
The difference between the interest rates on loans and deposits, which directly affect the profits of each bank, is widening. While the interest rates on deposits at banks are falling rapidly, the pace of reduction in lending rates is slow, and the difference between deposits and loans is
The interest rate gap has widened, and banks are being criticized for being the only ones raking in the profits. The Bank of Korea's Economic and Statistics Department will announce the "March 2025 weighted average interest rates for financial institutions" on the 1st of next month.
According to the February weighted average interest rate statistics released by the Bank of Korea, the February household loan interest rate (based on new transactions) of deposit banks was 4.52%, up from the previous month (4.6%).
Of loans to households, home equity loans fell 0.04% from 4.27% to 4.23%, while general credit loans fell 0.58% to 5.50%.
The overall lending rate for households and businesses combined was 4.53%. The interest rate received by deposit banks for savings (based on new lending amounts) was also below market interest rates.
The rate fell 0.1 percentage point from 3.07% to 2.97% due to factors such as the drop in the average annual interest rate. This marks the fifth consecutive month of decline since October last year.
As a result, the difference between deposit and loan interest rates was 1.49%, down 0.03% from the previous month (1.46%).
The interest rate gap between deposits and loans is expected to continue to grow for six consecutive months.
This is because while it is difficult to lower interest rates in order to tighten lending again due to a temporary surge in loans to foreigners, banks can adjust the base interest rate at any time to reflect the reduction in the base interest rate and the fall in market interest rates.
While the decline in deposit rates is expected to continue due to the cut in the base interest rate, the decline in lending rates has been slow, and the banking industry is likely to find it difficult to avoid criticism of its profits for some time to come.
The Bank of Korea will also hold a joint policy conference with the Korea Institute of Finance on the 30th. The conference will focus on the operational challenges and implications of Korea's monetary policy, as well as the Bank of Korea's experience in the open market and future challenges.
Sessions are scheduled to cover balance sheet policies and implications of major central banks.