South Korean commercial banks jacked up their mortgage interest rates on Monday on expectations the Bank of Korea could raise the benchmark rate as early as next month, placing the lending rate at 5 percent range for the first time in almost a year.

According to financial community sources on Sunday, the mortgage interest rate on KEB Hana Bank’s five-year mixed loan type (loan with interest rate shifting from fixed to floating after five years) rose by 0.087 percentage point from 3.740-4.960 percent to 3.827-5.047 percent effective on Monday.

The maximum mortgage interest rate offered by a major commercial bank in Korea entered the 5 percent level for the first time since last November.

The bank, however, said it is an official guideline interest rate, and the actual rate for customers can be lower than this level.

Rates are going higher in other banks. KB Bank rose the mortgage interest rate on a similar loan type by 0.11 percentage point from 3.41-4.61 percent to 3.52-4.72 percent, the highest increase pace among big five commercial banks. Shinhan decided to up its mortgage interest rate by 0.05 percentage point from 3.44-4.55 percent to 3.49-4.6 percent on the same day, with Woori Bank’s from 3.4-4.40 percent to 3.45-4.45 percent, and NH Bank’s from 3.53-4.67 percent to 3.58-4.72 percent.

Bank’s mortgage lending rates were bumped up by the movements in market. The yield on five-year bank bonds reached 2.392 percent last Friday, up 0.7748 percentage point from 1.6172 percent a year ago. It was up by 0.06 percentage point from 2.33 percent on Oct. 13.

Floating mortgage rates, typically lower than fixed mortgage rates, are also moving north. The big five banks upped the rates on their respective loan types, reflecting the increase in the benchmark COFIX rate up by 0.05 percentage point for new loans and 0.02 percentage point for extended loans on Oct. 16.

As a result, KB Bank’s COFIX-linked floating mortgage rate rose by 0.07 percentage point from 3.04-4.24 percent to 3.11 to 4.31 percent.

Mortgage rates will increase at a faster pace next month if the central bank raises the policy rate by 25 basis points as largely expected. The yield on the three-year government bond, a benchmark interest rate for Korea’s bond market, hit 2.088 percent, the highest level since Nov. 2014, while the cost of funds index to measure interest rates for borrowing by banks reached 1.52 percent in September, the highest this year.

By Kim Tae-sung and Minu Kim

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]