Private loan interest rate soars: BOK

The personal loan interest rate has risen by more than twice as much as the rates paid on savings and bank bonds, data showed Sunday.

According to industry and Bank of Korea data, interest rates paid on funds gained by banks through savings, installment deposits and bank bonds came in at 3.1 percent at the end of September, up 0.25 percentage point from the end of last year.

While changes in interest rates on loans are customarily linked to changes in rates on interest given by banks, the pattern did not apply to private loan lending rates this year.

Over the same period, interest rates on personal loans increased by 0.51 percentage point to come in at 5.86 percent at the end of September.

Property-backed private loan lending rates went up by 0.52 percentage point to 5.23 percent, while the interest rate charged on credit loans went from 6.65 percent to 7.36 percent over the same period.

With outstanding private loans standing at 449 trillion won ($404 billion), banks will take in 2.3 trillion won in interest this year, about 1 trillion won more than they would have if private lending rates increased at a similar pace to those paid on incoming funds.

In contrast, corporate lending rates increased by a similar margin to the interest rate on funds that went into banks.

The data showed that the corporate loan interest rate increased by 0.27 percentage point during the first nine months of the year.

By Kim Yon-se (cheesuk@hotmail.com)