"If Interest Rates Rise by 0.5%P, Loan Growth Decreases by 7.8 Trillion Won"

Assemblyman Hong Sung-guk "Vulnerable Groups' Lives in Hardship... Need to Prepare Countermeasures"

[Asia Economy Reporter Seo So-jeong] An analysis has revealed that a 0.50 percentage point increase in loan interest rates would suppress approximately 8 trillion won worth of loan transactions. As the Bank of Korea is increasingly likely to implement its second-ever big step (a 0.50 percentage point hike in the base interest rate) next month, the loan suppression effect is expected to grow.

According to data submitted by the Bank of Korea on the 28th to the office of Hong Seong-guk, a member of the Planning and Finance Committee from the Democratic Party of Korea, when the loan interest rate is 3%, a 0.50 percentage point increase would reduce the increase in household loans from 34.1 trillion won to 26.3 trillion won, a decrease of 7.8 trillion won.

Calculating the average change in household debt from 2012 to the third quarter of last year, it was explained that when the loan interest rate is 3%, loans increase by an average of 34.1 trillion won per quarter, but when the interest rate rises, the loan growth rate decreases by a certain amount.

When loan interest rates rise by 0.25 percentage points and 0.75 percentage points, the suppression effects on loan increases were 3.6 trillion won and 12.6 trillion won, respectively. If the rate rises by 1.00 percentage point at once, the suppressed loan amount reaches 18.1 trillion won, estimating that the quarterly loan increase would be limited to 16 trillion won.

The Bank of Korea projected that considering the current loan interest rate remains in the 4% range, the scale of loan suppression due to interest rate hikes will be even greater.

Representative Hong said, "If interest rates rise sharply, even essential loans for daily life may be avoided, or the high interest rates may raise loan barriers, making it harder for vulnerable groups who cannot borrow money to survive," adding, "Policy authorities should expand inclusive financial policies for vulnerable groups and prepare countermeasures by paying attention to the reduced balance and stability of the entire financial market caused by the rapid rise in interest rates."

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