Half of Mortgage Loans Have 'Variable Interest Rates'... Risk Exposure Due to Rising Rates

Financial Authorities Review Risk Factors Amid Interest Rate Hikes... Enter Heightened Alert Status

Loan counter of a bank (Photo by Yonhap News)

[Asia Economy Reporter Kwangho Lee] As the possibility of household debt increases due to rising market interest rates, it has been revealed that borrowers using variable interest rate loans account for half of all borrowers.

According to the Financial Supervisory Service on the 28th, as of the end of last year, the proportion of variable interest rates among mortgage loans, including bank jeonse deposit loans, was 50.3%. This means that one out of every two mortgage loan users is using a variable interest rate.

This proportion has steadily decreased from 57% at the end of 2016 and 55% at the end of 2018, but still, more than half of all borrowers are exposed to the risk of increased repayment burdens due to rising interest rates.

Thanks to prolonged low interest rates and abundant liquidity, the scale of mortgage loans itself has also ballooned.

According to the Bank of Korea, as of February, the outstanding household loans at banks totaled 1,003.1 trillion won, surpassing 1,000 trillion won for the first time. Among these, the outstanding mortgage loans reached 733.3 trillion won.

According to an interest rate rise simulation analyzed by the Financial Supervisory Service in 2019, for a borrower with a loan principal of 300 million won and a 30-year maturity, the monthly repayment amount increases by about 170,000 won from 1,347,000 won to 1,515,000 won when the interest rate rises by 1 percentage point from 3.5%.

The financial authorities have also entered a state of alert, checking risk factors due to rising interest rates.

Do Kyusang, Vice Chairman of the Financial Services Commission, said at a recent Financial Risk Response Team meeting, "We will closely monitor market conditions and proactively manage them in case the US interest rate rise trend synchronizes with domestic interest rates."

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