South Korea's Fixed Mortgage Rate Tops 5% as Borrowers Face Higher Repayments

September mortgage rates reach their highest since 2012

South Korea's average fixed mortgage rate reached 5.11% in September 2026, crossing 5% for the first time since the Bank of Korea began recording fixed and variable mortgage rates separately in January 2013. The increase puts a higher price on repayment certainty just as many households face adjustments to existing loans.

The Bank of Korea's September weighted average interest rate figures, released on October 29, put the average rate on newly issued mortgages at 4.88%, up from 4.66% in August. That was the highest since April 2012, when the rate stood at 4.94%, and extended the mortgage rate's rise to five consecutive months.

Variable mortgage rates also rose, reaching 4.76% from 4.53%. Fixed rates increased by the same 0.23 percentage points, from 4.88% to 5.11%, leaving a gap of 0.35 percentage points between the two categories.

The figures capture loans newly issued during September. Existing borrowers face changes according to their contracts, including when a variable rate is reset or an initial period with a fixed rate ends. Across domestic banks, 165 trillion won in mortgages are scheduled for rate adjustments during the fourth quarter.

October brought a more complicated picture. Bank bond yields, which help determine fixed mortgage prices, fell, while COFIX, a funding index used for many variable mortgages, rose. Borrowers therefore face two different forces: some new fixed mortgage quotes have eased, while existing variable loans may still become more expensive.

How the increases unfolded

The latest figures follow consecutive increases in the Bank of Korea's policy rate in July and August. Each increase was 0.25 percentage points. The central bank then held its benchmark at 3.00% on October 22, with all seven Monetary Policy Board members supporting the decision.

• October 2025: The run of 12 consecutive monthly increases in fixed mortgage rates began.
• July and August 2026: The Bank of Korea raised its benchmark rate at successive meetings.
• September: The average fixed mortgage rate reached 5.11%, while the combined mortgage average reached 4.88%.
• October 15: The Korea Federation of Banks announced September COFIX of 3.43%, up from 3.18%.
• October 22: The Bank of Korea held its benchmark rate at 3.00%.
• October 29: September bank interest rate figures showed higher borrowing costs across mortgages, personal credit and corporate loans.

The July and August increases were the first consecutive policy rate rises since January 2023, the end of a sequence of seven increases at successive meetings beginning in April 2022.

Why a policy pause has not stopped loan rates rising

The Bank of Korea's benchmark rate influences the cost of money throughout the financial system, but commercial banks also price loans using their own funding costs and market interest rates. Those costs can keep moving after a central bank leaves its rate unchanged.

In September, the yield on bank bonds with an AAA credit rating and a maturity of five years rose from 4.35% to 4.53%. Such bonds are an important reference for fixed mortgage pricing. COFIX increased by 0.25 percentage points to 3.43%, its highest level since June 2024 and its largest monthly increase since November 2022.

Shorter market rates rose as well. The rate on certificates of deposit maturing in 91 days increased from 2.97% to 3.17%. Yields on AAA bank bonds maturing in three months increased from 3.07% to 3.32%, while those on bonds maturing in six months rose by 0.29 percentage points.

Kim Sung-jun, head of the Bank of Korea's financial statistics team, attributed the increase in lending rates to the August policy rate rise and higher reference rates during September. He also identified changes in banks' additional charges and tighter loan management as possible contributors.

A mortgage price usually combines a reference rate with an additional charge set by the bank, minus any discounts available to the customer. A falling reference rate can therefore take time to reach borrowers, and banks' pricing decisions can affect how much of that decline reaches an individual loan.

What the higher rates mean in won

A borrower owing 500 million won would pay 35 million won in annual interest at 7%, equivalent to about 2.92 million won a month, assuming the balance stays unchanged. At 5%, the same balance would generate 25 million won in annual interest, or about 2.08 million won monthly.

The difference is 10 million won a year, or roughly 833,000 won each month. These calculations cover interest alone. A mortgage requiring regular repayment of the borrowed money also includes principal, and its payment depends on the remaining term and repayment schedule.

Even a smaller change matters. An increase of 0.25 percentage points adds 1.25 million won to annual interest on an unchanged balance of 500 million won, equivalent to about 104,000 won a month.

The September difference between average fixed and variable mortgage rates, 5.11% against 4.76%, amounts to 1.75 million won a year on that same balance. That is about 146,000 won a month in interest at the starting rates. Future changes in a variable rate determine how that comparison develops during the loan.

Existing borrowers face a large round of resets

The Financial Supervisory Service's figures submitted to Social Democratic Party lawmaker Han Chang-min put mortgages scheduled for rate adjustments in the fourth quarter at 165 trillion won. Borrowers who obtained rates of around 2% to 3% in 2021 may encounter a substantial increase when their initial terms end.

The amount awaiting adjustment is 21.1 trillion won higher than the 143.9 trillion won scheduled in the preceding quarter, an increase of about 14.7%. A larger volume of mortgages is therefore reaching the point at which current borrowing conditions can affect household budgets.

The pressure was already visible after October's mortgage rate increases. A borrower who took a mortgage of 500 million won in October 2021 saw the rate change from 3.6% to 5.6% this month. The monthly repayment rose from 2.27 million won to 2.79 million won, adding 520,000 won to the household's commitments.

Variable mortgages adjust at intervals specified in the contract, so the September COFIX increase reaches borrowers at different times. A household approaching its next adjustment can face a higher rate even during a month when the central bank leaves policy unchanged.

Fixed and variable mortgages move in different directions

October's mortgage quotes showed why the September averages offer only part of the picture for someone seeking a new loan. At KB Kookmin, Shinhan, Hana, Woori and NH NongHyup, rates quoted on October 27 ranged from 4.61% to 6.65% for mortgages with an initial fixed period of five years. Rates for mortgages adjusting every six months ranged from 4.42% to 6.48%.

The gap at the lower end was about 0.20 percentage points, down from 0.55 points at the end of September. At the upper end, the October 27 gap was 0.17 points. The five banks' fixed quotes had fallen by 0.30 percentage points at the lower end and 0.25 points at the upper end since September ended.

Bank bond yields help explain the change. The yield on bonds maturing in five years fell from about 4.53% on September 30 to 4.28% on October 23. Over the same period, the newly announced COFIX increase was feeding into variable mortgage pricing.

Another October 23 tally placed variable mortgage quotes at 4.42% to 6.795%, compared with the October 27 range of 4.42% to 6.48% for products adjusting every six months. A borrower's applicable rate depends on the bank, product, adjustment period and available discounts.

A mortgage with a fixed period of five years provides certainty during that period, followed by the adjustment terms in its contract. The length of that protection matters alongside the initial rate when comparing the cost of borrowing.

Households face higher costs beyond home purchases

The average rate on all new household loans reached 4.96%, its highest since November 2023, when it was 5.04%. The detailed figures put the monthly increase at 0.20 percentage points; the same 4.96% average also appeared with a smaller increase of 0.14 points in another published tally.

General unsecured personal loans, which require no pledged asset such as a home, averaged 6.49%, up from 6.33% in August. That was the highest since December 2023, when the average stood at 6.58%. Rates had risen for four consecutive months, with June's level at 5.72%.

Loans used to finance jeonse deposits also became more expensive, rising from 4.35% to 4.57%. Under South Korea's jeonse rental system, tenants provide a large deposit rather than paying the full housing cost through monthly rent. Higher deposit loan rates increase the cost of renting for households that borrow that money.

The proportion of new household lending carrying fixed rates increased from 23.5% to 24.0%, its second consecutive monthly rise. Within mortgages, however, the fixed share fell from 35.3% to 34.2%. Fixed mortgages remained more expensive than variable products in September, leaving borrowers to weigh a lower initial cost against repayment certainty.

Businesses pay more while deposit rates rise

The average rate on all new loans at deposit banks increased from 4.40% to 4.57%. Corporate loan rates rose from 4.30% to 4.49%, with smaller businesses experiencing the larger increase.

Large companies paid an average of 4.37%, up 0.16 percentage points. Small and medium businesses paid 4.63%, up 0.25 points. The Bank of Korea linked corporate borrowing increases to higher short market rates, including certificates of deposit maturing in 91 days. Some banks issued more loans to large companies at lower rates, limiting the increase in that category.

Savers received higher rates too. The average rate on newly accepted savings deposits and related funding products rose by 0.24 percentage points to 3.45%. Pure savings deposits averaged 3.39%, while market funding products, including certificates of deposit and financial bonds, averaged 3.69%.

Deposit rates rose faster than lending rates during September, narrowing the difference between average new lending and deposit rates from 1.19 to 1.12 percentage points. Across outstanding balances, the average deposit rate rose to 2.27% and the average loan rate to 4.48%.

Higher deposit rates reward savers, but they also increase what banks pay to obtain funds. As those costs enter COFIX, they can put further pressure on variable mortgage rates.

What could change after the October pause?

The Bank of Korea held rates on October 22 while assessing the effect of its previous increases. Its decision reflected strong domestic growth and continuing inflation pressure, alongside uncertainty surrounding prolonged Middle East tensions and the monetary and fiscal policies of major economies.

The central bank expected growth in 2026 and 2027 to exceed its August forecasts of 3.3% and 2.9%, respectively. It also expected core inflation in 2027, a measure that leaves out volatile food and energy prices, to exceed its previous forecast of 2.5%. Further rate decisions will depend on incoming economic indicators.

Park Jun-woo, a bond strategist at Hana Securities, maintained a forecast for further increases in November 2026 and February 2027. Kim Sung-soo, a bond strategist at Hanwha Investment & Securities, also forecast two increases of 0.25 percentage points, taking the benchmark to 3.50%, with that rate maintained through the end of 2027. These are brokerage forecasts; the central bank has not decided those increases.

The firms differed on bond markets. Hana expected greater volatility, while Hanwha forecast a floor of 3.80% for government bond yields with a maturity of three years until the November policy meeting.

For fixed mortgages, October's decline in bank bond yields offers a possible source of relief. Bogeumjari mortgage rates had also been unchanged since August, following five increases totalling 1.25 percentage points through July. Kim Sung-jun said October mortgage rates could fall if they followed bond yields, while noting that banks' additional charges and market movements through the end of the month would also matter.

Key Points

• September's average fixed mortgage rate reached 5.11%, the first reading above 5% since separate records began in January 2013.
• The combined mortgage average rose to 4.88%, its highest since April 2012. Variable mortgages averaged 4.76%.
• Mortgages worth 165 trillion won are scheduled for rate adjustments in the fourth quarter, about 14.7% more than in the preceding quarter.
• A rise from 5% to 7% adds 10 million won in annual interest on an unchanged loan balance of 500 million won.
• October bank bond yields fell while COFIX rose, creating different pricing pressures for fixed and variable mortgages.
• The Bank of Korea held its benchmark at 3.00% on October 22. Further increases remain a possibility, with some brokerages forecasting moves in November and February.