SEOUL: Bank lending rates on new household loans sank in October, central bank data showed Thursday, while local banks offered more on new deposits ahead of a possible U.S. rate hike. The average rate for new loans to households slipped 0.05 percentage point from the previous month to 3.06 percent in October, according to the Bank of Korea (BOK).
October marked the fifth-consecutive month of decline since June, when the central bank announced a surprising rate cut, sending its policy rate to a record low of 1.5 percent. The average rate on new home-backed loans was also shaved 0.02 percentage point from a month earlier to 2.9 percent last month.
The average lending rate on all new loans inched down 0.01 percentage point to 3.42 percent in October as the interest rate on new loans extended to businesses gained 0.01 percentage point to 3.57 percent.
Despite the steady decline in lending rates on new household loans, the average interest rate paid by local lenders on new deposits gained 0.04 percentage point from a month earlier to 1.58 percent in October, narrowing the gap between lending and deposit rates by 0.05 percentage point to 1.84 percent, according to the BOK.
The rise in deposit rates comes ahead of what many, including BOK Gov. Lee Ju-yeol, have called an imminent start of U.S. rate hikes before the end of the year, which in turn could prompt mass outflows of capital from developing markets, including South Korea.
