The Bank of Korea Raises Employee Loan Interest Rates to the 1% Range

Korea Development Bank Employee Loan Interest Rate Raised from 0.7% to 1.1%
Individual Limit Set at 50 Million Won

[Asia Economy Reporter Jang Sehee] The Bank of Korea has raised its employee loan interest rate from the 0% range to 1.1%. This is due to the rise in market interest rates following the advent of the 1% base interest rate era.

According to the Bank of Korea on the 8th, the bank raised the employee loan interest rate to an annual 1.1% starting from the 1st of this month. This is a 0.4 percentage point increase compared to last year's 0.7% rate. However, considering income tax and guarantee insurance fees, the final handling interest rate for housing funds was around 1.7?1.8%, and for living stabilization funds, it was about 1.5%. In 2020, loans were provided at annual rates of 1.3% and 1.0% in the first and second halves of the year, respectively.

As of the end of last year, the Bank of Korea lent 5.59 billion KRW in housing funds and 15.68 billion KRW in living stabilization funds to its executives and employees.

Despite the Bank of Korea raising loan interest rates to the 1% range, the final handling interest rates remain significantly lower than those of commercial banks, which is expected to continue fueling controversy over preferential treatment.

In fact, the mortgage loan interest rate of deposit banks in November rose by 0.25 percentage points in one month to 3.51% annually, marking the highest level in 7 years and 4 months since July 2014 (3.54%).

Compared to commercial bank rates, the Bank of Korea’s loan interest rate is about 1.7 percentage points lower. The Bank of Korea also faced preferential treatment controversies during last year’s national audit for providing funds to employees at ultra-low interest rates in the 1% range for several years.

Regarding this, a Bank of Korea official explained, "From this year, as interest rates have risen, the loan interest rates for employees have also increased to the 1% range. Since the rates are linked to the one-year Treasury bond rate, if interest rates rise further, the loan interest rates will also increase accordingly."

Meanwhile, there are opinions within the Bank of Korea that the per-person loan limit is woefully insufficient. Currently, the Bank of Korea has maintained a loan limit of 50 million KRW per person for over 20 years.

A Bank of Korea official stated, "The limit has been fixed at 50 million KRW for more than 20 years. Given that housing prices in the metropolitan area exceed 1 billion KRW, it seems that the reality is not reflected at all."

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