Banks Raise Mortgage Loan Rates Again, Making Borrowing Even Harder

ATMs of commercial banks installed in Yongsan-gu, Seoul. Photo by Jinhyung Kang aymsdream@

Major commercial banks have begun raising interest rates on mortgage loans. This move is interpreted as an effort to tighten lending criteria by increasing rates, following the government's announcement of policies to curb household loans.

According to the financial sector on July 1, Woori Bank set the interest rate for its periodic mortgage loans, which adjust every five years, at an annual rate of 3.57% to 4.77%. This is 0.06 percentage points higher than the previous day, June 30, when the rate was 3.51% to 4.71% per annum. Although the benchmark interest rate declined, Woori Bank increased the spread, resulting in a higher mortgage loan rate.

Shinhan Bank also raised the interest rate for its variable-rate mortgage loans, which are linked to the new balance COFIX and adjust every six months, from 3.54% to 4.95% per annum to 3.62% to 5.03% per annum over the same period. Hana Bank increased the minimum interest rate for its mortgage refinancing product by 0.1 percentage points, from 3.73% to 3.83% per annum, by raising the spread.

The consecutive interest rate hikes by major banks are seen as efforts to minimize new mortgage loan applications in line with government guidelines. Last week, the government announced a strong lending regulation, limiting individual mortgage loans to 600 million won, and stated its intention to reduce household loans.

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