Yeongkkeuljok Interest Burden Soars... Existing Loans 'Rise Again' New Loans 'Rise Again'

Household Loans Continue to Rise
Existing Borrowers' Interest Rates Increase for 2 Years and 2 Months
New Borrowers' Interest Rates Rise Again from May

As household loans continue to increase, both existing "Yeongkkeul" borrowers (those who borrowed to the limit for investment) and new Yeongkkeul borrowers are facing growing interest rate burdens. The upper limit of mortgage loan interest rates at the five major banks (Kookmin, Shinhan, Hana, Woori, Nonghyup) has surpassed 7%.

As of the 18th, the variable interest rates for mortgage loans ranged from 4.17% to 7.04%, while fixed rates (switching to variable after 5 years) ranged from 3.90% to 6.38%. Although the COFIX (Cost of Funds Index), which serves as the benchmark for variable mortgage rates, dropped by 0.03 percentage points last week, the slight decrease had minimal impact on the rates.

Meanwhile, the upward trend in household loans has not slowed, continuing for five consecutive months. As of the 14th, the outstanding household loan balance at the five major banks was 681.6216 trillion won, an increase of 809.6 billion won from the end of last month (680.812 trillion won). By loan type, mortgage loans increased by 617.6 billion won during this period.

According to the Bank of Korea's Economic Statistics System on the 18th, the "outstanding balance-based" interest rate, which reflects the rates for existing mortgage borrowers, was 4.21% as of July, marking a rise for 2 years and 2 months in a row (continuously increasing since May 2021's 2.64%). Although the pace of increase has slowed since the beginning of this year, there is no sign yet of a downward trend.

The outstanding balance-based interest rate is divided into variable and fixed rates, both of which continue to rise. The variable rate recorded 4.69% as of July. Although it fell by 0.01 percentage points from the previous month, it remains at the highest level since the Bank of Korea began measuring and publishing this rate in 2013. The fixed rate shows a similar trend, standing at 3.5% as of July, the highest since March 2015's 3.62%.

A representative from a commercial bank said, "Until early this year, the prevailing expectation was that mortgage rates for existing borrowers would decrease. However, since April, the rise in COFIX and financial bond rates has pushed loan interest rates up, invalidating that expectation."

Interest rates for new mortgage borrowers are also rebounding. The "newly issued amount-based" interest rate rose to 4.28% in July, increasing again since three months ago (May 4.21% → June 4.26%). Specifically, both variable (May 4.39% → June 4.41% → July 4.45%) and fixed (May 4.16% → June 4.20% → July 4.22%) rates showed the same upward trend.

The financial sector anticipates a continued upward trend in interest rates. Yoon Seok-jin, a researcher at Hana Financial Management Research Institute, analyzed, "Global interest rates fell due to signs of slowing U.S. employment but rebounded due to strong economic indicators and rising oil prices. Domestic rates also rose reflecting the resurgence of consumer prices and external rate increases. Going forward, volatility is expected to expand again depending on oil prices and the policy direction of the U.S. Federal Reserve (Fed)."

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