Banks’ household loan rate hits 8-year high in March

Banks’ interest rates on household loans jumped to the highest level in nearly eight years in March amid toughened curbs on lending and the central bank’s monetary tightening, data showed Friday.

Banks’ household loan rate stood at 3.98 percent per year on average in March, up 0.05 percentage point from a month earlier, according to the data from the Bank of Korea (BOK).

It was the highest since the rate rose to as high as 4.02 percent in May 2014.

Banks’ lending rates have been on an upward trend in line with the BOK’s recent moves to raise borrowing costs to keep a lid on growing inflation pressure and rising household debt.

Earlier this month, the central bank raised its policy rate by a quarter percentage point to 1.5 percent, the fourth rate increase since August last year. It has hinted at further hikes in the near future.

Of the total household loans, unsecured lending saw the interest rate rise 0.13 percentage point on-month to 5.46 percent in March, the highest since July 2014 when it stood at 5.59 percent.

The rate for home-backed loans ticked down to 3.84 percent in March from the previous month’s 3.88 percent.

Rising borrowing costs have spawned worries that they could deepen the burden on households who have taken out loans to tide them over during the pandemic and bought houses amid soaring home prices.