If Loan Interest Rates Rise by 1%p, Interest Burden Increases by 12 Trillion Won

[Asia Economy Reporter Jang Sehee] An analysis has emerged that if the household loan interest rates of commercial banks rise by 1 percentage point due to the Bank of Korea's base rate hike, the interest burden on households will increase by approximately 12.5 trillion won.

According to the "Analysis of Household Debt Interest Repayment Burden Due to Interest Rate Hikes" published on the 1st by the National Assembly Budget Office in the 'Economic and Industrial Trends & Issues,' it is expected that if the Bank of Korea further raises the base rate, the rise in household loan interest rates will accelerate.

Specifically, the interest repayment burden for household heads in their 40s is expected to increase by 4.02 trillion won, and for those in their 50s, by 3.96 trillion won. By occupation of the household head, the burden increase is 6.2 trillion won for salaried workers and 4.57 trillion won for self-employed individuals.

The Budget Office expressed concern, stating, "If the Bank of Korea raises the base rate further, causing loan interest rates to rise, the increase in household interest repayment burdens could raise credit risk and negatively impact consumption. The ratio of interest increase to income is highest among self-employed households, which may exacerbate the burden on self-employed individuals already facing economic difficulties due to COVID-19."

It added, "In response to the increased credit risk and consumption contraction among vulnerable groups and the self-employed due to interest rate hikes, it is necessary to conduct close monitoring and prepare appropriate countermeasures."

Meanwhile, financial authorities have decided to maintain the policy of lowering the loan growth rate to the pre-COVID-19 level of around 4%. However, there are concerns that lowering the loan growth rate will make it even more difficult for vulnerable groups to obtain loans.

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