Rising Loan Interest Rates... Insurance Companies Reach 10% Range

Both New and Renewal Loans See Interest Rate Hikes
Rates Expected to Rise Further Following Regulatory Loan Recommendations

Current Loan Interest Rates of Non-life Insurance Companies (Source: Korea Non-life Insurance Association)

[Asia Economy Reporter Oh Hyung-gil] Following banks, insurance companies are also raising loan interest rates one after another amid the government's tightening of loan regulations. Not only mortgage loans but also credit loan interest rates have surged sharply, with loan interest rates reaching the 10% range. There are concerns that household interest burdens will increase further amid the spread of COVID-19.

According to the insurance industry on the 7th, the average mortgage loan interest rate for life insurance companies based on loans handled in July was 3.22%, up 0.02 percentage points from 3.20% in the previous month. Credit loan rates also rose slightly by 0.01 percentage points to 8.72% compared to the previous month.

Samsung Life's mortgage loan interest rate rose 0.10 percentage points from the previous month to 3.13%, while Heungkuk Life increased from 3.36% to 3.41%, and Fubon Hyundai Life raised rates from 3.64% to 3.69%.

The increase in credit loan interest rates was steeper. The income verification-free type, which allows borrowing small amounts around 5 million KRW based on insurance premium payment performance, mostly saw interest rate hikes.

Non-life insurance companies also joined the rate hike. The average mortgage loan interest rate rose 0.07 percentage points from 3.25% in the previous month to 3.32%, and credit loans (verification-free type) increased from 8.51% to 8.85%. In particular, Heungkuk Fire & Marine Insurance's credit loan interest rate exceeded 10% for the first time in 1 year and 3 months since May last year, reaching 10.21%.

Loan interest rates at insurance companies are expected to rise further. After receiving guidelines from financial authorities recommending that personal credit loan limits be restricted to annual income and that total loan volume targets be managed, insurance companies are revising their loan plans internally. An insurance industry official said, "There is some leeway in total volume management, so the atmosphere is to respond by reducing preferential interest rates rather than stopping loans."

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