April 'Bogeumjari Loan' Interest Rate Raised by 0.25% Across the Board... "Interest Burden Increasing Gradually"

Maximum 2.75~2.85% per product
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Current Interest Rates for Bogumjari Loan as of the 1st [Photo by Korea Housing Finance Corporation]

[Asia Economy Reporter Song Seung-seop] The interest rates for the Housing Finance Corporation's Bogeumjari Loan were uniformly raised by 0.25 percentage points starting today. With the increase in interest rates for the Bogeumjari Loan, a mortgage loan aimed at low-income households, the burden on actual homebuyers is expected to grow.

According to the Housing Finance Corporation on the 1st, from April applications, the interest rates for the ‘u-Bogeumjari Loan’ (online application) and the ‘t-Bogeumjari Loan’ (counter application) have been adjusted to 2.60?2.85%. For the ‘Akkim-e Bogeumjari Loan,’ which requires an internet contract, the rates rose to 2.50?2.75%.

The Bogeumjari Loan is a long-term fixed-rate mortgage loan product supplied by the Housing Finance Corporation, repaid in installments. It allows borrowing up to 70% (maximum 300 million KRW) of a home priced at 600 million KRW or less, with fixed interest rates, to be repaid over 10 to 30 years.

The Bogeumjari Loan interest rates steadily declined since March, hitting an all-time low of 2.00?2.35% in November. However, after a 0.15 percentage point increase in December, rates rose by another 0.10 percentage point in January, reaching 2.25?2.60%.

This is analyzed to be due to the recent rise in U.S. Treasury yields. The Bogeumjari Loan interest rates are based on the 5-year government bond yields. A Housing Finance Corporation official explained, "Due to the rise in U.S. Treasury yields, the mid- to long-term government bond yields, which serve as the benchmark for policy mortgages, increased, leading to an adjustment in Bogeumjari Loan rates," adding, "We minimized the increase to avoid imposing excessive repayment burdens on the main users of the Bogeumjari Loan, low-income, and actual homebuyers without homes."

Following the increase in Bogeumjari Loan rates, the overall mortgage loan interest rate also rose by 0.03 percentage points to 2.66%, marking six consecutive months of increase. This trend in rising interest rates is criticized for increasing the interest burden not only on low-income actual homebuyers seeking new loans but also on borrowers who previously borrowed at low rates.

As of the end of last year, mortgage loans had already surged by 67.8 trillion KRW over one year to 910.6 trillion KRW. According to the Bank of Korea, when loan interest rates rise by 1%, the total interest that all households with loans must pay is estimated to increase by about 12 trillion KRW.

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