"Even Credit Loans Are Blocked" Housing Loan Interest Rates Near 4%... Growing Burden on Ordinary People

Mortgage Loan Interest Burden Increases as Personal Loans Are Blocked
COFIX Based on New Transactions in November at 0.90%
Highest Since 1.06% Recorded in May

[Asia Economy Reporter Park Sun-mi] "The variable interest rate on mortgage loans has increased again. T.T" "Only those without money are having a harder time." "Most people who took out loans are just starting to struggle." These are complaints about mortgage loan interest rates posted on an online real estate information sharing community on the 16th, when variable interest rates for mortgage loans at commercial banks all rose simultaneously.

With credit loan interest rates rising in the banking sector and loans becoming difficult to obtain, mortgage loan interest rates approaching the 4% range have deepened the sighs of low-income citizens without money. In an era where food, clothing, and shelter are difficult without loans, ordinary people inevitably become sensitive to even small interest rate changes. The reason for these complaints is that the housing shortage caused by rising house prices and jeonse prices has not been resolved, and the income of low-income people has decreased due to the spread of the novel coronavirus infection (COVID-19), increasing the interest burden on loans for those without money.

According to the banking sector, commercial banks raised the variable mortgage loan interest rates based on new loan amounts by 0.03 percentage points starting from this day.

Kookmin Bank adjusted from the previous annual 2.76~3.96% to 2.79~3.99%, Woori Bank from 2.73~3.83% to 2.76~3.86%, and NH Nonghyup Bank from 2.66~3.67% to 2.69~3.70%. Shinhan Bank, which calculates based on the 5-year financial bond, also raised the variable mortgage loan interest rate for new loans by 0.06 percentage points to 2.45~3.70%. Hana Bank, which uses the 6-month financial bond as a reference, increased by 0.073 percentage points to 2.686~3.986%. From this day, the interest burden on loan applicants has increased further.

The rise in variable mortgage loan interest rates in the banking sector is due to the increase in the Cost of Funds Index (COFIX), which is the basis for calculating mortgage loans, specifically the new loan amount-based index. According to the Korea Federation of Banks, the November COFIX based on new loan amounts was 0.90%, up 0.03 percentage points from the previous month. COFIX, which rebounded in September after 10 months, slightly declined in October but rose again in November. It is the highest since recording 1.06% in May.

COFIX is the weighted average interest rate of funds raised by eight domestic banks, so the rise in COFIX means that banks' funding costs have increased. In particular, the new loan amount-based COFIX is calculated based on funds newly raised during the month, so it reflects market interest rate changes relatively quickly.

[Image source=Yonhap News]

Outstanding balance and new outstanding balance-based COFIX declined, but...

The outstanding balance-based and new outstanding balance-based COFIX, which reflect market interest rate changes gradually, recorded 1.21% and 0.96% respectively in November, down 0.04 percentage points each from the previous month. As a result, the variable mortgage loan interest rates based on the new outstanding balance at commercial banks were lowered by 0.04 percentage points to 2.77~3.97% at Kookmin Bank, 2.82~3.92% at Woori Bank, and 2.75~3.76% at Nonghyup Bank.

However, if the new loan amount-based COFIX continues to rise in the future, the new outstanding balance-based COFIX may also increase. Since its introduction, the new outstanding balance-based COFIX has consistently shown a downward trend.

Even though the increase in variable interest rate mortgage loan rates is slight, it is a burden for low-income people who are already struggling with rising credit loan interest rates, reduced loan limits, and loan rejections in the banking sector.

Under strong 'household loan volume control' pressure from financial authorities, Shinhan Bank decided not to accept non-face-to-face applications for salaried worker credit loans, including the 'Solpyeonhan Salaried Worker Credit Loan,' until the end of the year. KB Kookmin Bank also, in principle, blocked all household credit loans over 100 million won until the end of the year. Woori Bank also suspended sales of its main non-face-to-face credit loan product, 'Woori WON (WONhaneun) Salaried Worker Loan.'

This content was produced with the assistance of AI translation services.