Concerns Grow Over Surging Household Loans... Banks Raise Loan Interest Rates Again

Reduction Until Two Weeks Ago... Sudden Policy Shift

Banks have started raising mortgage loan interest rates again. This is a measure to implement the government's policy to curb household loans. Although banks lowered interest rates until mid-month following financial authorities' guidelines to curb household loans by strengthening loan screening rather than raising interest rates, they eventually raised interest rates again as the pace of household loan growth accelerated.

Internet bank K-Bank set the interest rate for variable-rate mortgages, which change every six months, at 4.22~7.98% per annum on the 27th. Compared to the 26th (3.79~6.62% per annum), the lowest interest rate increased by 0.43 percentage points in just one day.

Banks were competitively lowering interest rates just two weeks ago. Shinhan Bank lowered the mortgage loan spread by 0.1 percentage points on the 14th of this month, and Hana Bank lowered the mortgage loan interest rate by 0.15 percentage points on the 10th. K-Bank also lowered the variable-rate mortgage interest rate by 0.23 percentage points on the 18th of last month.

K-Bank's decision to raise mortgage interest rates is to curb the influx of household loans. Until the 26th, the lowest interest rate for variable-rate mortgages sold by K-Bank was in the 3.7% range per annum, the lowest level in the banking sector, including major commercial banks (4.1~4.3% per annum). As the base interest rate is falling and consumer interest in variable-rate mortgage products is growing, it is analyzed that the interest rate was raised to prevent a rapid consumer concentration phenomenon. K-Bank explained that it was a "measure reflecting market conditions."

There is speculation that the trend of raising mortgage interest rates will spread in the future. This is because household loans surged during the government's reversal of the land transaction permit zone cancellation process. Last month, the balance of household loans in the financial sector increased by 4.3 trillion won, the largest increase since November last year (5 trillion won).

Reporter Jin Jeong justjin@hankyung.com