[2025 Audit] Lee Changyong: "Signs of Renewed Overheating in Seoul Housing Market... Growing Uncertainty in Household Lending"

Lee Changyong, Governor of the Bank of Korea. Photo by Joint Press Corps

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Lee Changyong, Governor of the Bank of Korea, recently assessed that the housing market in the Seoul metropolitan area, after a brief period of stabilization, has shown signs of overheating again since September, particularly in Seoul. He stated that this has also increased uncertainty regarding the flow of household loans.

On October 20, during the National Assembly’s Strategy and Finance Committee audit held at the Bank of Korea’s main building in Jung-gu, Seoul, Governor Lee explained, "The domestic financial system remains generally stable, but delinquency rates continue to be high due to sluggish regional construction markets and increased repayment burdens on vulnerable borrowers." He added, "Recently, heightened uncertainty surrounding U.S. tariff policies has led to increased volatility in the foreign exchange market, with the won-dollar exchange rate surging to the low 1,400 won range."

Governor Lee evaluated that the Korean economy has shown improvement since the second quarter, supported by a recovery in economic sentiment, the effects of supplementary budget execution, and robust performance in the semiconductor sector. However, he pointed out, "Uncertainties remain high regarding Korea and China’s trade negotiations with the United States, as well as the pace of domestic demand recovery."

Regarding inflation, he said, "There is a possibility that food prices may see a relatively strong increase," but projected, "The consumer price inflation rate will remain stable at around 2% due to stable international oil prices and subdued demand pressure."

Governor Lee emphasized, "Since October last year, we have lowered the base rate by a total of 1.00 percentage point over four separate occasions. Given the continued high level of domestic and external uncertainty, we will closely monitor trends in the economy, prices, and financial stability as we manage monetary policy."

Meanwhile, the Bank of Korea has reduced the interest rate on its financial intermediary support loans from 2.0% to 1.0% to support vulnerable sectors. It has also expanded the ceiling and extended the support period for the 'Temporary Special Support Program for SMEs' introduced last year. Governor Lee explained, "We have enhanced the effectiveness of monetary policy through the introduction of a two-way liquidity adjustment system and the reform of the liquidity adjustment loan system, and we are continuously working to advance market infrastructure, including improvements to the foreign exchange market structure and the establishment of the Korea Overnight Financing Rate (KOFR) as a risk-free benchmark rate."

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