Which Loan Products Can Mitigate Risks During a Period of Rising Interest Rates?

Handled by 15 Banks Nationwide

[Asia Economy Reporter Park Sun-mi] A ‘Mortgage Loan with Interest Rate Rise Risk Mitigation’ product, which limits the interest rate increase over a certain period or fixes the monthly repayment amount, has been reintroduced.

According to the financial sector on the 17th, 15 banks nationwide including Kookmin, Shinhan, Hana, Woori, Nonghyup, Industrial Bank, SC, Citi, Daegu, Busan, Gwangju, Jeju, Jeonbuk, Gyeongnam, and Suhyup currently offer mortgage loans with interest rate rise risk mitigation.

There are two types: the ‘Interest Rate Cap Type,’ which limits the interest rate increase to within 0.75%p annually and 2%p over 5 years, and the ‘Fixed Monthly Repayment Type,’ which reduces principal repayment when interest increases to maintain the total monthly principal and interest repayment amount.

The Interest Rate Cap Type allows borrowers using variable interest rate loans to add a special agreement that limits the interest rate increase to within 0.75%p annually and 2%p over 5 years. Existing borrowers can subscribe by adding the special agreement to their current loan without separate screening, with an additional interest rate of 0.15~0.2%p annually, and new borrowers taking out variable interest rate mortgage loans can also subscribe. After subscription, borrowers can cancel the special agreement later if they wish.

There is also a product that maintains the total monthly principal and interest repayment amount by reducing principal repayment when interest increases. The fixed monthly repayment period is 10 years, after which it can be converted to a general variable interest rate loan or the monthly repayment amount can be recalculated. The interest rate increase is limited to 2%p over 10 years and 1%p annually. It is available at an interest rate 0.2~0.3%p higher than variable rates, and existing borrowers can also use it through refinancing.

The Interest Rate Cap Type can be subscribed to by adding a special agreement at the bank where the loan is currently held, and the Fixed Monthly Repayment Type product can be used through refinancing. A financial authority official stated, "We will continue to improve measures to respond to the increased household burden due to rising interest rates."

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