As commercial banks abolished the lending interest rate benefits that had been favored so far, there are concerns that the interest rate hike is in earnest and a ‘blowback bomb’ has emerged. This is because, in a situation where the rising trend of assets is weakened, even the interest burden is increased, and multiple debtors can act as a primer on household debt.
According to the Bank of Korea on the 23rd, last month, banking household loans, including mortgage loans and other loans, increased 6.700 billion won to 103.1 trillion won. This is the first case that the monthly household loans of banknotes exceeded 1,000 trillion won.
The problem is that the interest rate for household loans is on the rise at a rapid pace due to the rise in government bond interest rates. According to the Bank of Korea, in January, the interest rate on household loans based on the amount of new payments by deposit banks rose to 2.83% per year, up 0.04 percentage points from the previous month, for five consecutive months. According to the data submitted by the Bank of Korea to Congressman Doo-Hyun Yoon, the strength of the people, in the case of personal loans, even if the interest rate rises by 1 percentage point, the loan interest will increase by KRW 1.18 trillion. The interest rate for mortgage loans, which accounts for the largest share of household loans, also rose by 0.04 percentage points to 2.63% per year, the highest since November 2019 (0.09%).
Commercial banks abolish preferential interest rates on loans
Woori Bank virtually abolished all of the preferential interest rates for 11 credit loan products that had applied preferential interest rates from the 22nd. If the preferential interest rate is eliminated, the interest burden to be borne by the position of receiving a loan increases that much. These products are employee preferential credit loans (WPL), Woori Professional Club, household account book loans, Woori Best Loan, Woori Medi Club, preferential loans for employees of public institutions, Woori Salary Transfer Credit Loans, private taxi boss loans, Woori Student Loan, WON Credit loans, mobile loans for office workers and public officials.
Until now, lenders have received interest reduction benefits of at least 0.3~0.6% points at preferential interest rates, but now they have to bear all the burdens without discounts.
Also, starting on the 25th, the preferential interest rate applied to the’Our Jeonse Loan’ will be lowered from 0.4% to 0.2%. Our Jeonse Loan fell from 0.8% to 0.4% in October last year. The section on the preferential interest rate of 0.4% of the Seoul Guarantee Insurance Securities collateral loan was also deleted.
Earlier, the Nonghyup Bank also removed the 0.2% preferential interest rate clause that was applied to the first new customers of mortgage loans on the 8th. In addition, the preferential interest rate applied when the short-term variable rate was selected was also reduced from 0.2% to 0.1%. Shinhan Bank also recently lowered preferential interest rates for mortgage loans, real estate loans, and jeonse loans by 0.2 percentage points.
As of the end of January, the proportion of variable-rate home mortgage loans directly affected by an interest rate hike is 69.7% (provisional), and experts observe that the interest burden will increase in the future.
4.2.3 million multi-debtors, “stopping debts back”… Increased by 14,000
The loan amount of multiple debtors who take new loans and prevent them from returning to debt reached 518 trillion won. According to the Bank of Korea’s 2017-2020 multi-debtor statistics, as of the end of last year, the number of multi-debtors was 4.236,000, and the amount of loans was 51.6 trillion won. Last year, the amount of loans per person for multiple debtors was 12.19 million won, an increase of 1,361 million won from 2017.
Multi-debt is borrowed from three or more financial companies, and it is often borrowed from two financial sectors (savings banks, credit card companies, capital) or three financial sectors (loan companies), which are usually not loanable from banks.
Among multiple debtors, the proportion of young people in their 30s or younger, who have relatively low repayment capabilities, has increased sharply. As of the end of December 2020, the proportion of multiple debtors in their 30s and under was 25.2%, the second largest after 32.7% in their 40s. Those in their 50s and over 60s recorded 29.1% and 13.0%, respectively.
Multiple financial sector officials said, “If the government’s corona19 loan extension and interest repayment postponement are ended and interest rates are raised in earnest, multiple debtors can be a primer for insolvent household debt.” It must be carefully classified and managed,” he emphasized.
Bank of Korea Governor Lee Ju-yeol said in a press conference last month, “The difference between the 3-year government bond and the base rate is somewhat higher than the average value since the past 10 years and the global financial crisis.” It is showing a downward stabilization, but if the market interest rate rises sharply and leads to an interest rate hike, we are examining the situation in which the debt burden may increase, centering on vulnerable borrowers.”
Meanwhile, investors who have filled the limit at commercial banks are switching to high-interest card loans of 15-20%. Card loans lend money up to 100 million won for 36 months. According to the Financial Supervisory Service, among card loan users, there are a lot of multiple debtors. As of the first half of last year, 56.1% of card loan users were multiple debtors using card loans. The credit card loan recovery rate was only 11.8%, which is lower than that of the 2008 global financial crisis (26.6%).
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