Constrained credit loans despite fears of harm to the common people
Increasing burden, rising interest rates
The sighs of the common people who received bank loans are deepening. This is because the interest rate of the banking sector jumped sharply as the government’s lending regulation and the rising market interest rate overlapped.
According to the financial sector on the 28th, the credit loan interest rates for the four major commercial banks of Kookmin, Shinhan, Hana, and Woori on the 25th were 2.59-3.65% per year. This is a maximum of 0.6 percentage points from the end of July last year (1.99 to 3.51%), when 1% of credit loans appeared due to the Bank of Korea’s cut in the standard interest rate.
The reason that the interest rate on credit loans rose by 0.6%p in six months is analyzed by the effect of the combination of market trends and government regulations. Recently, long-term treasury bond rates have exceeded pre-coronavirus levels reflecting inflation expectations. In addition, under pressure from the financial authorities, the banking sector is reducing the loan limit and preferential interest rate, which intensifies the burden on the common people.
The government began tightening household loans in the second half of last year to prevent the flow of commercial funds into the stock and real estate markets. Concerns were raised that if the household loan growth rate was blindly caught, the low-income class could be hurt.
As the government’s pressure increased, commercial banks are known to have lowered their target for managing household loan growth this year to around 5%. In order to keep the household loan growth rate at the 5% level, banks have no choice but to manage credit loans first. The most effective way to tie credit loans is to increase interest rates.
The banking sector has been reducing high-income and professional credit loans since October last year. However, it is interpreted as expanding the target to the general public as it felt limited in restraining the rise in credit loans under pressure from the authorities.
An official in the financial sector said, “The government’s excessive lending regulations are leading to the deterioration of the life stability of the common people.” He added, “The hopes of the common people who are in need of a sudden change in their lives or dreaming of getting a home are gradually fading.”
In addition to credit loans, interest rates on mortgages are also rebounding. The interest rate for mortgage loans (linked to Cofix) as of 25 days of the four major commercial banks is 2.34~3.95% per year. Compared to the end of July last year (2.25 to 3.95%), the minimum interest rate rose by 0.09%p.
In the case of variable interest rates on mortgage loans, cofixes are mainly followed. COPIX is an indicator of how much of the 8 domestic banks spent raising funds for loans. Changes in interest rates of received products such as deposits, savings accounts and bank bonds actually handled by the bank are reflected. The co-fix applied in February by banknotes (as of January) is 0.86% based on the amount of new treatment. It is 0.05%p higher than 0.81% in July last year.
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