Mortgage rates near 8%, credit loan rates approach 7% as borrowing costs surge

Bank lending rates are climbing sharply, squeezing borrowers who took out loans to invest in stocks or stretched their finances to buy homes. The upper end of fixed mortgage rates has already surpassed 7.5 percent annually, and analysts say rates could breach 8 percent if the Bank of Korea raises its benchmark interest rate.

According to financial industry data released Thursday, fixed-rate (five-year) mortgage rates at the five major banks — KB Kookmin Bank, Shinhan, Hana Bank, Woori and NH NongHyup Bank — stood at 4.51 to 7.50 percent per year as of Wednesday. That marks a rise of 0.25 to 0.40 percentage points from the 4.26 to 7.10 percent range recorded at the end of last month, a gain achieved in less than two weeks. At some banks, even the lower end of the rate range has already exceeded 5 percent.

Rising bond yields are driving lending rates higher, fueled by escalating tensions in the Middle East and growing concerns about monetary tightening in the United States. Expectations that the Bank of Korea will raise its benchmark interest rate in the second half of this year have added further upward pressure on market rates. Financial markets are pricing in at least two rate hikes this year as the central bank looks to address a high exchange rate and elevated inflation.

In Seoul's bond market, the yield on three-year government bonds rose 0.025 percentage points from the previous session to 3.881 percent annually as of Wednesday. The five-year financial bond yield — the benchmark used to set fixed mortgage rates — also climbed to 4.394 percent, up 0.187 percentage points from the end of last month. If market rates keep rising, lending rates are expected to face additional upward pressure.

Banks are also raising rates on variable-rate mortgages. As fixed rates climbed quickly, demand shifted toward variable-rate products, which carry relatively lower rates, prompting banks to adjust those rates to manage the influx of borrowers.

NH NongHyup Bank recently raised its six-month variable rate by 0.2 percentage points, while KB Kookmin Bank cut the preferential rate on its KB Star Apartment Mortgage — the six-month variable rate tied to the new-balance COFIX — by 0.2 percentage points. A reduction in preferential rates effectively raises the rate applied to borrowers. Hana Bank also plans to raise its new-balance COFIX-linked variable rate next week.

Overdraft loan rates are also rising amid continued demand from investors borrowing to fund stock purchases. According to the Korea Federation of Banks, the average rate on new overdraft loans at the five major banks stood at 4.85 percent per year in April, up 0.06 percentage points from 4.79 percent at the end of last year. The average rate at the three internet-only banks was 6.26 percent. Kakao Bank's average rate reached 6.99 percent, in effect approaching the 7 percent threshold. Kakao Bank's rates tend to run higher because a larger share of its products target borrowers with mid-to-low credit scores.

The upper end of general credit loan rates at the five major banks has already surpassed 6 percent annually. As of Wednesday, one-year revolving credit loan rates ranged from 4.35 to 6.15 percent per year.

As lending rates continue to rise, the interest burden on heavily leveraged borrowers is expected to grow. For example, a borrower who took out a 300 million won (approximately $197,000) mortgage on a 30-year equal principal-and-interest repayment plan at 4 percent annually would pay about 1.43 million won per month. If the rate rises to 6 percent, that monthly payment climbs to roughly 1.79 million won, and at 7 percent it reaches approximately 1.99 million won.

The burden is also significant for credit loan borrowers. On a 100 million won loan, a rate increase from 4 to 7 percent per year would push annual interest payments from 4 million won to 7 million won — an additional monthly cost of roughly 250,000 won.

Experts advise borrowers to review their loan structures as interest rates enter a rising cycle. Those with a high proportion of variable-rate debt should reassess their repayment plans in light of potential further rate hikes, and consider making partial principal repayments if funds are available. Borrowers carrying multiple loans are particularly urged to compare maturity dates and rate terms, and to prioritize paying down the highest-rate debt first.

Apartment prices in the Dongtan district of Hwaseong, Gyeonggi Province climbed nearly 2 percent in a single week — triple the pace of the previous week — posting the nation's highest rate of home price gains, as buyers cited expectations of an influx of semiconductor-sector money into the area.

“반도체 머니 여기로 올텐데, 지금 사자” 동탄, 전주보다 3배 더 올랐다[부동산360]

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