Implementation of Household Interest Relief Measures, Introduction of Variable to Fixed Interest Rate Conversion Program

As Burden on Yeongkkeuljok Increases
Ruling Party Implements 'Interest Rate Conversion Program'
Measures to Ease Household Interest
Loan-Deposit Interest Rate Calculation System to Be Thoroughly Reviewed

Yoon Ho-jung, Co-Chairman of the Democratic Party's Joint Election Committee, is delivering opening remarks at the Policy Coordination Meeting held at the National Assembly on the 13th. Photo by Yoon Dong-ju doso7@

[Asia Economy Reporter Koo Chae-eun] The Democratic Party of Korea announced on the 13th that it will make exceptions in managing the Debt Service Ratio (DSR) to prevent borrowers from being overburdened by rising base interest rates, and will also implement measures to ease household interest burdens. They also stated that they have requested financial authorities to introduce a so-called ‘fixed interest rate conversion program’ that allows switching from variable to fixed interest rates.

This measure comes as the Bank of Korea’s expected base rate hike this month is anticipated to push mortgage loan interest rates at commercial banks above 6% per annum, increasing the burden on borrowers such as the ‘Yeongkkeul-jok’ (those who borrow to the maximum). The strengthening of DSR regulations from this month, which raises the loan approval threshold, has also become a concern for prospective borrowers.

Yoon Ho-jung, the floor leader of the Democratic Party, said at the policy coordination meeting on the same day, “We reviewed the current status of household debt and loans with financial authorities yesterday,” adding, “We will implement measures to ease household interest burdens so that the interest burden on existing loans does not become excessive due to rising interest rates.” He specifically mentioned, “We requested (the financial authorities) to introduce a fixed interest rate conversion program that allows switching variable rate products to low fixed rates.”

Regarding the interest rate conversion program, he said, “It has already been implemented in 2015 and 2019,” and added, “Recently, with the increase in loan volumes and interest rate hikes, banks’ profits have increased and household burdens have grown. We will closely examine the loan-deposit interest rate calculation system to enable reasonable calculations.”

Park Wan-joo, chairman of the Policy Committee, stated, “Considering the repayment burden on household principal and interest due to the domestic and international interest rate hike trend, continuous management is absolutely necessary,” and added, “We will ensure that the loan conversion program, which can alleviate the pain caused by future interest rate hikes, operates in a way that provides practical help.” He explained specifically that when applying DSR, loans for young people will be executed with sufficient consideration of future income. He also urged, “We once again call on financial authorities to thoroughly inspect whether deposit and loan interest rates are being set reasonably.”

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