Commercial banks’ lending rates are rising. This is a sign that we are not pleased with the households that have made unreasonable loans due to rising house prices and anticipation of continued rising. There are also prospects mixed with concerns that individuals who have succeeded in preparing their own homes or moved to new private homes in debt may return with unbearable interest bomb bills.
According to the financial sector on the 1st, as of the 25th of last month, the credit loan interest rates (1st grade, 1 year) of the four major commercial banks such as KB Kookmin, Shinhan, Hana, and Woori were around 2.59-3.65% per year. Compared to 1.99-3.51% at the end of July last year, when the 1% level of credit loan interest rate appeared, the lower end increased by 0.6 percentage points. Mortgage interest rates are also on the rise. The mortgage interest rates of the four major banks (linked to Cofix) were 2.34-3.95% per year, up 0.09 percentage points from the end of July last year (2.25-3.95%).
It is interpreted as a result of a combination of the financial authorities’ tightening of household loans, which started from the end of last year, and the rise in indicator interest rates reflected in the calculation of each loan interest rate. In addition, analysts say that the era of low interest rates is nearing due to expectations of economic recovery and inflation concerns following the corona 19 vaccination. The household debt management plan, announced by the financial authorities in March, is expected to be a major inflection point. The key is to apply a 40% total debt repayment ratio (DSR) for each borrower, and DSR is an index that calculates the principal and interest repayment burden for all loans of borrowers in loan review. It reflects the burden of principal and interest not only in mortgage loans, but also in all financial sector loans including credit and card loans. It is known that the financial authorities are considering applying a 40% DSR for each individual borrower under the judgment that loans should be made in accordance with the individual’s repayment ability.
If bank loans are tightened and interest rates continue to rise, it is predicted that the regulatory impact will quickly spread to the real estate market. This is because households support the soaring house prices and jeonse prices with loans. According to the recent statistics of the Korea Real Estate Agency, the nationwide weekly apartment price trend in the fourth week of February (as of the 22nd), the apartment sales price in Daejeon rose 0.41%, maintaining a solid upward trend. The jeonse price also increased by 0.32%. In the past 2-3 years, Daejeon has been circumventing the government’s real estate regulations and demand for foreign investment and speculation has led to a surge in house prices.
In June of last year, the government announced a’management plan for stabilizing the housing market’ in cooperation with relevant ministries and said, “Daejeon has been increasing significantly since the second half of last year. Demand for alternative investments continued to flow into non-regulated areas, accumulating for one year,” The rate of increase reaches 11.50%.” At the same time, the entire Daejeon was grouped as the area subject to adjustment and the remaining 4 autonomous districts excluding Daedeok-gu were overheated with speculation, but the overheating of the real estate market has not subsided. Rather, it created a vicious cycle that stimulated the anxiety of homeless people, encouraging chase buying through excessive loans. In addition, concerns that households may be hit by a direct hit are raising their heads as the constant rise in loan interest rates directly leads to a steep increase in interest expenses. An official in the real estate industry said, “After the government’s 2·4 measures, the atmosphere of the nationwide slowdown is being detected, and it is said that it is time for Daejeon to be adjusted.” “If the loan interest rate continues to rise in the yard where there is, it will not be easy for households that have large debts with the so-called’zeroth’ to endure the burden of interest.” Reporter Seung-Hyun Moon