If Mortgage Rates Rise to 7% by Year-End, Monthly Repayment for Mid-Sized Seoul Apartment Will Be 2.91 Million Won

Zigbang, Interest Rate Increase Simulation
Repayment Amount Rises 34% Compared to April
69% of Workers' Disposable Income

[Asia Economy Reporter Hwang Seoyul] It is projected that if the fixed interest rate on mortgage loans enters the 7% range, owners of medium-sized apartments in Seoul will need to spend 2.91 million KRW monthly to repay their apartment loans. The steep rise in interest rates is increasing the financial burden of purchasing a home.

On the 13th, Zigbang conducted a simulation on the increase in financial costs for purchasing apartments in Seoul under the assumption that interest rate hikes will continue. The results showed that if the mortgage loan interest rate reaches 7%, the monthly repayment amount for a medium-sized apartment in Seoul (84㎡ exclusive area) would be 2.91 million KRW.

As of April this year, the mortgage loan interest rate was 3.9%, up 1.17 percentage points compared to the same month last year. During this period, the average sale price of apartments across all sizes in Seoul was approximately 1.15 billion KRW, the average sale price of small apartments (59㎡ exclusive area) was 980 million KRW, and medium-sized apartments (84㎡ exclusive area) averaged 1.31 billion KRW. Based on this, if a 30-year mortgage loan is executed up to the loan-to-value (LTV) limit, the average monthly loan repayment for apartments of all sizes in Seoul is estimated at 1.94 million KRW. By apartment size, the repayment is estimated at 1.78 million KRW for 59㎡ and 2.09 million KRW for 84㎡. These amounts represent increases of 350,000 KRW and 400,000 KRW respectively compared to the same month last year.

The average sale price reported for apartments of all sizes in Seoul from January 2022 to the present is 1.06156 billion KRW. When obtaining a mortgage loan up to the LTV limit, the required equity capital is 669.25 million KRW, and the loan amount is 392.31 million KRW. If this sale price is maintained until the end of the year and the loan interest rate rises to 7%, the estimated monthly loan repayment in December would be 2.61 million KRW; if it rises to 5.5%, 2.23 million KRW; and if it remains at around 4%, 1.87 million KRW. This is expected to be an increase of 670,000 KRW, or about 34%, compared to the current monthly repayment as of April.

If the mortgage loan interest rate rises to 7%, urban worker households purchasing an 84㎡ apartment in Seoul with a loan would have to allocate 69% of their disposable income to mortgage loan repayments. This ratio exceeds half for all apartment sizes, with 62% for apartments of all sizes and 59% for small apartments (59㎡).

There are also forecasts that mortgage loan interest rates at commercial banks could rise to 7% within this year due to interest rate hikes originating from the U.S., prompting calls for preparation. Zigbang stated, “It is necessary to readjust housing purchase plans and household financial structures, which were made in a low-interest market, to align with the period of rising interest rates,” adding, “During periods of rising interest rates, more cautious investment is required, including reviewing housing purchase strategies, income, and corresponding financial cost repayment plans.”

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