[Interest Rate Hike] Hell of Yeongkkeul and Debt Investment... Borrowers Who Overborrowed 'Cry Out'

Borrowers with 300 Million Won Mortgage and 100 Million Won Credit Loan Face Annual Interest Burden Increase of Over 1 Million Won

[Asia Economy Reporter Kwangho Lee] As the base interest rate hike is expected to push mortgage loan interest rates to 6% soon, the financial strain on the Yeongkkeul (borrowing to the limit) group is deepening. The problem is that the Bank of Korea is widely expected to raise the rate twice more by the end of this year after this hike, bringing it up to the pre-COVID-19 level of 1.75% per annum. Previously, the Bank of Korea estimated that each 0.25 percentage point increase in the base rate would raise households' annual interest burden by about 2.9 trillion won.

According to the financial sector on the 14th, the fixed interest rates on mortgage loans at the five major commercial banks?KB Kookmin, Shinhan, Hana, Woori, and NongHyup?soared to 3.78?5.54% per annum as of the previous day. Compared to the end of last December (3.60?4.98% per annum), the lower bound rose by 0.18 percentage points and the upper bound by 0.56 percentage points. Variable mortgage loan rates also jumped to 3.57?5.07% per annum, and credit loan rates reached 3.44?4.73%, with the upper bound approaching 5%.

With the Bank of Korea's rate hike on this day, variable rates, which are immediately affected, are expected to rise by at least 0.25 percentage points. A simulation requested from Bank A showed that a borrower with a 300 million won mortgage loan and a 100 million won credit loan would have to pay about 1 million won more in interest annually due to this rate hike. Mortgage loan interest increases by about 750,000 won per year, and credit loan interest by about 250,000 won. In Bank B's simulation, a person with a 200 million won mortgage loan and a 50 million won credit loan would face an increase of 700,000 won in mortgage loan interest and 130,000 won in credit loan interest annually, totaling an additional 800,000 won burden.

Moreover, the Housing Finance Corporation's policy financial product, the Bogeumjari Loan, has tightened its requirements, which could increase repayment pressure. Starting today, the Housing Finance Corporation will shorten the verification period for additional home acquisitions related to Bogeumjari Loan applications from every three years to annually. If additional home acquisitions are confirmed during the verification stage, the grace period for selling the property will be shortened from the current one year to six months. The strengthened verification for Bogeumjari Loans is a measure to preemptively prevent cases of gap investment abuse.

Professor Tae-yoon Sung of Yonsei University's Department of Economics advised, "Raising the base interest rate is inevitable from the perspective of overall liquidity management and financial and monetary policy. Instead of trying to shield vulnerable groups from the burden caused by the rate hike solely through financial policy, it is necessary to approach it with policy support through fiscal measures."

Professor Jung-geun Oh of Konkuk University's Department of Economics stated, "The interest burden on financially vulnerable groups will inevitably increase significantly due to the base rate hike. Support for vulnerable groups should come from fiscal measures, but since the fiscal situation is also tight, it is necessary to guide appropriate entry into stages such as partial debt relief through debt restructuring."

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