[서울신문] If the loan interest rate rises 1%P, the local boss pays 5 trillion more interest.

Self-employed man crying twice over steep rate hikes

Estimated total interest burden of household loans of 11,800 billion
Credit loan interest rate increased by 0.62%P in 7 months
6.5% increase in food prices… OECD average twice
When economic activity is normalized, the possibility of inflation increases

The burden of the Young Kul (invested by collecting souls) and debt (invested by debt) who received large loans from banks and invested in real estate and stocks amid the ultra-low interest rate trend is increasing. Banks are raising the interest rate on loan one after another. Even if the loan interest rate rises by only 1 percentage point, the interest burden on the loaned households is expected to increase by 12 trillion won.

According to the financial sector on the 14th, the four major commercial banks in Korea (KB Kookmin, Shinhan, Hana, and Woori Bank)’s credit loan interest rates (1st grade, 1 year) as of the 11th are 2.61-3.68% per year. Compared to the end of July last year (1.99 to 3.51%), which fell to the 1% level, the lower end increased by 0.62 percentage points.

Mortgage interest rates are also upbeat. As of the 11th, the four major banks’ interest rates on mortgage loans (linked to Cofix) are 2.52~4.04% per year. The lowest interest rate rose 0.27 percentage points from the end of July (2.25 to 3.95%), the year-round low of last year. In addition, compared to the 25th of last month (2.34~3.95%), the minimum interest rate rose 0.18% point in two weeks. As of this month, Shinhan Bank raised both the mortgage interest rate and the jeonse loan interest rate by 0.2 percentage points.

The reason for the rise in household loan interest rates is due to an increase in the cost of financing by banks and the fact that banks cut their preferential interest rates due to restrictions on tightening loans by financial authorities.

Even a slight increase in loan interest rates is a huge burden for those who borrow money. According to data submitted by the Bank of Korea to the Office of the People’s Power of the People’s Power of the National Assembly’s Political Affairs Committee, Doo-Hyun Yoon, when the interest rate on personal loans (housing mortgage loans, credit loans, etc.) rises by 1 percentage point, the interest on household loans rises by a total of KRW 1.18 trillion. The amount of interest increase by income quintile is 500 billion won in the first quintile (the lower 20% of the income), 1 trillion won in the second quartile, 2 trillion won in the third quartile, 3 trillion won in the quartile, and 5.2 trillion won in the fifth quartile. Excluding the high-income class in the 5th quintile, only the low-income class and the middle class have an increased interest burden of 6.6 trillion won. In addition, the Bank of Korea calculated that if the loan interest rate jumps by 1 percentage point, the interest burden of self-employed people suffering from Corona 19 will increase by 5.2 trillion won.

The recent steep rise in inflation is also a bad sign for borrowers. This is because if inflation (inflation rises) continues, there is a high possibility that the Bank of Korea, whose core purpose of operating the organization,’stabilizing inflation’, raises the base interest rate and sucks in liquidity (money). According to the BOK, the National Statistical Office, and the Organization for Economic Cooperation and Development (OECD), the rate of increase in food prices in Korea in January this year was 6.5%. It is more than twice the OECD average (3.1%).

In a recent monetary credit policy report, the Bank of Korea said, “The possibility of a rapid expansion of inflation (in Korea and major countries) is limited as the uncertainty caused by Corona 19 is still large.” If demand spurts and international commodity prices rise, the possibility that inflation will increase more than expected cannot be ruled out.”

In academia, it is difficult to raise the standard interest rate right away, but as time goes on, the pressure to raise it is expected to increase. “If Korea’s economic growth rate is higher than last year and the inflation rate exceeds 1% this year, there will be an incentive to raise the standard rate,” said Kim Sang-bong, a professor of economics at Hansung University. It has no choice but to expand,” he said.

Reporter Yoo Dae-geun [email protected]