"Even Credit Loans Are Blocked" Mortgage Loan Rates Near 4%... Growing Burden on Ordinary People (Comprehensive)

Increased Interest Burden on Mortgage Loans
COFIX at 0.90% for New Contracts in November
Highest Since 1.06% Recorded in May
Bank Credit Loans Also Tighten... Difficult to Borrow Over 100 Million Won

[Asia Economy Reporter Park Sun-mi] "The variable interest rate on mortgage loans has risen again. T.T" "Only those without money are having a harder time." "Most who took out loans are 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 on mortgage loans at commercial banks all rose simultaneously.

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

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 today.

Kookmin Bank adjusted from the previous 2.76?3.96% per annum 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%, respectively. Shinhan Bank, which calculates based on the 5-year financial bond, also raised its variable mortgage loan interest rate for new loans by 0.06 percentage points to 2.45?3.70% per annum. Hana Bank, which uses the 6-month financial bond as a reference, also increased by 0.073 percentage points to 2.686?3.986% per annum. From today, borrowers’ interest burdens have increased further.

The rise in variable mortgage loan interest rates at banks is due to the increase in the Cost of Funds Index (COFIX), which is the basis for mortgage loan calculation, specifically the new loan amount-based index. According to the Korea Federation of Banks, the November new loan amount-based COFIX was 0.90%, up 0.03 percentage points from the previous month. COFIX, which had 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 new outstanding balance-based variable mortgage loan interest rates 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 compared to before.

However, if the new loan amount-based COFIX continues to rise in the future, the possibility that the new outstanding balance-based COFIX will also increase should be kept open. 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.

Bank loans becoming difficult due to 'household loan volume control'
No loans over 100 million won

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 basically blocked all household credit loans exceeding 100 million won until the end of the year. Woori Bank stopped selling its main non-face-to-face credit loan product, 'Woori WON Salaried Worker Loan,' and reduced interest rate benefits on credit loan products such as 'Woori Main Salaried Worker Loan' and 'Woori Financial Club.'

Hana Bank is reportedly planning to adjust the basic limits of five professional credit loan products, including the 'Doctor Club Loan' for doctors and the 'Lawyer Club Loan' for lawyers, from a maximum of 150 million won to within 50 million won by the end of this month or early next year at the latest.

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