Aftershock of Interest Rate Hikes... "Even My Credit Line Is Blocked" VS "Rates Are Still Low" (Summary)

Next Month, Credit Loan Limits at Kookmin, Shinhan, and Woori Banks Restricted to Annual Income
Minus Account Limit Reduced to 50 Million Won

[Asia Economy Reporter Park Sun-mi] The aftershocks of the 0.25 percentage point base interest rate hike are sweeping fiercely. With the threshold for new mortgage loans raised, and interest rates and limits on general credit loans and overdraft accounts set to be simultaneously reduced, it is expected that real demand borrowers urgently needing funds will suffer significant damage. However, some predict that the impact will not be severe since interest rates remain at very low levels despite the hike, and the loan regulations were anticipated measures.

According to the financial sector on the 30th, KB Kookmin, Shinhan, and Woori Banks plan to implement measures in September to limit credit loan limits to within annual income. Among credit loans, overdraft accounts, which allow easy access to funds anytime, have had their loan limits reduced to 50 million KRW by Hana, Woori, and Shinhan Banks, and Kookmin Bank also plans to take the same action in September.

NH Nonghyup Bank, which received a 'warning' from financial authorities regarding household loan management before the interest rate hike, stopped issuing new mortgage loans from the 24th. After reducing the maximum credit loan limit from 200 million KRW to below 100 million KRW and within 100% of annual income, Hana Bank also limited personal credit loan limits to within annual income starting from the 27th.

With the three measures of interest rate hikes, loan restrictions, and loan reductions occurring simultaneously, the credit loan balance of the five major commercial banks reached 140.8048 trillion KRW as of the 27th. This is at the level of late July when there was a loan boom due to large public offering subscriptions, but the current strong trend of new overdraft account openings suggests it will increase further.

In particular, since overdraft accounts exceeding 50 million KRW will completely disappear from the five major banks next month, demand to secure them in advance has surged, increasing new overdraft account openings by more than 60% in the past week. For Bank A, new overdraft amounts more than doubled from 9.1 billion KRW at the beginning of this month to 19.7 billion KRW on the 27th. Bank B also saw new overdraft amounts more than double from 10.7 billion KRW to 21.3 billion KRW during the same period. With speculative demand exploding before loan regulations fully take effect, a sharp increase in household loan size in August is inevitable.

Increased Debt Repayment Burden Ahead of Moving Season... Concerns Over "Loans Not Being Approved"

In the market, there are concerns that the base interest rate hike and loan restrictions and reductions, activated ahead of the full-fledged autumn moving season, will block the financial lifeline of the vulnerable class struggling due to the spread of COVID-19, increasing anxiety among low-income households.

In fact, on real estate online communities, posts are flooding in saying that to get the lowest interest rates and the largest loan limits, one must apply for loans now ahead of the fourth quarter real estate balance payment dates, prompting people to rush to submit documents. Many also complain about enduring both repayment pressure from the interest rate hike and anxiety over the possibility of loans not being approved.

However, there is also a view that the confusion will not be as great as expected. This is because the current interest rate level is very low, and the financial authorities had already announced strengthening household loan volume management early on, so market interest rates had been pre-reflected. A representative from a commercial bank said, "There was a side effect of a rapid increase in loans due to the previously very low interest rates," adding, "Both the base rate hike and loan limit reductions are processes of correcting excessive parts, so the confusion will not last long."

Kim Su-jeong, senior researcher at Hana Financial Management Research Institute, said, "Despite regulatory tightening by policy authorities and interest rate hikes, if the rapid rise in housing prices continues or the increase in household debt does not slow down, there is a high possibility of an additional rate hike in November." However, she also noted, "Market interest rates have already pre-reflected the 1.00~1.25% base rate, and due to adjustments in expectations about the pace of rate hikes and the US Federal Reserve's cautious normalization leading to external rate stability, the upward trend may weaken."

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