[Base Rate 3%] Insurance Companies' Mortgage Loan Rates Expected to Approach 7%

Bank of Korea Governor Lee Chang-yong is presiding over the regular Monetary Policy Committee meeting held at the Bank of Korea in Jung-gu, Seoul, on the morning of the 12th.
[Image source=Yonhap News]

[Asia Economy Reporter Changhwan Lee] As the Bank of Korea has sharply raised the base interest rate, the mortgage loan interest rates of insurance companies in the secondary financial sector have also exceeded 6% and are heading toward 7%.

According to the Korea Life Insurance Association and the Korea Non-Life Insurance Association on the 12th, the highest mortgage loan interest rate among domestic insurance companies last month was 6.29% for Fubon Hyundai Life's mortgage loan (household). This product has steadily increased from the highest interest rate of 4.63% in early January this year to last month.

During the same period, Samsung Life's mortgage loan (limit type) interest rate rose from a maximum of 5.01% to 6.06%, and Hanwha Life's Home Dream Mortgage Loan increased from 5% to 5.64%.

Among non-life insurers, NH Nonghyup Non-Life Insurance's mortgage loan interest rate rose from 3.85% in January to 5.15% in August. During the same period, Samsung Fire & Marine Insurance increased from 3.83% to 4.45%, and Hyundai Marine & Fire Insurance rose from 3.63% to 4.725%.

Loan interest rates of insurance companies in the secondary financial sector are relatively lower compared to banks in the primary financial sector, but recently they have been rapidly catching up with banks. This month, the highest fixed mortgage loan interest rate among the four major commercial banks rose to 7.17%. There is a forecast that when insurance companies' interest rates are compiled this month, the highest interest rate could approach 7%.

The rise in loan interest rates is due to the Bank of Korea rapidly raising the base interest rate. On the 12th, the Bank of Korea held a Monetary Policy Committee meeting and raised the base interest rate by 0.5 percentage points (p) from the previous 2.5% to 3.0%. This is the highest level in 10 years since October 2012.

The Bank of Korea also raised the base interest rate by 0.5 p in July. At that time, the financial sector also raised loan interest rates in line with the base interest rate.

Insurance companies are raising not only loan interest rates but also deposit interest rates. Major life insurers such as Tongyang Life, Hanwha Life, Fubon Hyundai Life, and Heungkuk Life have recently launched savings insurance products offering fixed interest rates of 4 to 4.5% per annum one after another.

An insurance company official said, "As the base interest rate rises, the overall product interest rates are also increasing," adding, "Since the Bank of Korea is expected to raise the base interest rate further, the upward trend in loan interest rates will continue for some time."

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