Park Hong-geun "High interest rates burden ordinary people... Please monitor bank interest rate hikes" Kim So-young "Will ease burden on vulnerable borrowers"

Democratic Party "Actively Address the Prevention of Loan-Deposit Interest Rate Spread"

Park Hong-geun, floor leader of the Democratic Party of Korea, is attending the party floor meeting held at the National Assembly on the 28th and delivering an opening remark. Photo by Yoon Dong-joo doso7@

[Asia Economy Reporter Koo Chae-eun] The Democratic Party of Korea expressed growing concerns over household debt due to high interest rates and urged financial authorities to actively prevent excessive interest rate spreads between deposits and loans at commercial banks. The Financial Services Commission stated that considering the scale of household debt in South Korea, which could pose a significant burden on the economy, it will strive to alleviate the burden on vulnerable borrowers.

On the afternoon of the 28th, Park Hong-geun, the floor leader of the Democratic Party, said at a meeting held at the National Assembly Members' Office Building with the Financial Services Commission to assess the household debt situation, "With the consumer price inflation rate expected to reach the 6% range in June, the Bank of Korea is increasingly likely to raise the base interest rate until the end of the year." He added, "Although this is an unavoidable measure to curb inflation, concerns over household debt due to rapid interest rate hikes are growing."

Park predicted, "Household debt in South Korea is approaching 1,900 trillion won, and the proportion of variable interest rates has surpassed 77%, reaching an all-time high. Since the U.S. Federal Reserve has indicated nearly double the current rate hikes, Korea’s interest rates are expected to reach the 3% range by the end of this year, with mortgage loan interest rates rising to the 8% range."

Park emphasized, "High interest rates will become an unbearable burden for ordinary citizens who have just managed to secure their own homes. In the triple hardship of high inflation, high interest rates, and high exchange rates, the role of the Financial Services Commission is more important than ever." He pointed out, "While everyone is suffering from the interest rate hikes, there are reports that commercial banks are smiling with record-high profits."

He continued, "Given the increased burden on ordinary citizens, we request the Financial Services Commission to actively monitor banks' interest rate hikes and prevent excessive interest rate spreads between deposits and loans. Since the second supplementary budget this year includes a budget of 1.8 trillion won and 500 billion won in in-kind investments for financial support such as low-interest loan conversions and debt restructuring, we ask the Financial Services Commission to ensure thorough implementation of related projects."

Kim So-young, Vice Chairman of the Financial Services Commission, also expressed concern, saying, "Household debt, which expanded significantly during the COVID-19 response, has stabilized since the second half of 2021 due to management efforts and interest rate hikes. However, considering the absolute scale of household debt in South Korea, it is true that it could become a burden on the economy at any time."

Vice Chairman Kim added, "Considering LTV and DSR ratios and household debt soundness, the possibility of systemic risk spreading is limited, but due to recent global economic contraction and rising interest rates, the repayment burden on vulnerable borrowers is increasing, requiring continuous management. I understand that the financial sector itself is making efforts to ease difficulties for vulnerable borrowers, and the financial authorities will maintain close communication."

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