SEOUL– Banks’ household loan rate rose to the highest level in more than a decade in October as the Bank of Korea (BOK) has hiked interest rates to tame inflation, central bank data showed Tuesday.

Banks’ household lending rate applied to new loans last month stood at 5.34 percent per annum on average, up 0.19 percentage point from a month earlier, according to the preliminary data from the BOK.

It was the highest level since June 2012, when the rate was at 5.38 percent.

The rise in borrowing costs is in line with the BOK’s move to hike its policy rate as part of efforts to bring inflation down. The policy rate serves as a benchmark for borrowing costs in the market.

The BOK has hiked the rate by a combined 2.75 percentage points since August last year to tame inflation. The rate currently is at 3.25 percent.

Banks’ mortgage lending rate inched up 0.03 percentage point on-month to 4.82 percent in October, the highest since May 2012, when it stood at 4.85 percent.

The rate of their unsecured lending to households climbed 0.60 percentage point over the same period to 7.22 percent, the highest since June 2012, when it was at 7.89 percent.

The rate banks charged on deposits also rose 0.63 percentage point to 4.01 percent. This marked the highest point since January 2009, when it increased to 4.16 percent.

The spread on banks’ lending and deposit rates narrowed 0.08 percentage point to 1.25 percent last month.

The decline came as financial authorities have ramped up monitoring on banks’ rate levels amid criticism they are quick to reflect the central bank’s monetary tightening in lending but slow to apply it to savings.

Source: Yonhap News Agency