Rising Credit and Mortgage Loan Rates... "Yeongkkeul and Debt Investment Borrowers Face Growing Interest Burden"

Bank Interest Rates Rise 0.6%P in 6 Months
Loans Decrease Amid Stock Market Stagnation and Rising Rates

A loan counter inside a bank in Seoul (Photo by Yonhap News)

[Asia Economy Reporter Kwangho Lee] Interest rates on unsecured loans have risen by 0.6 percentage points in six months. Consumers' burdens, such as 'Yeongkkeul' (borrowing to the limit) and 'Bittoo' (investing with loans), are expected to increase.

According to the financial sector on the 28th, the interest rates on unsecured loans (grade 1, 1 year) from the four major banks?KB Kookmin, Shinhan, Hana, and Woori?were between 2.59% and 3.65% as of the 25th.

This is 0.6 percentage points higher compared to the range of 1.99% to 3.51% at the end of July last year.

Not only unsecured loan interest rates but also mortgage loan interest rates are showing a rebound trend.

The mortgage loan interest rates (linked to COFIX) of the four major banks are between 2.34% and 3.95% annually. The lowest interest rate has also increased by 0.09 percentage points compared to the end of July last year (2.25% to 3.95%).

The rising loan interest rates inevitably increase the burden not only on new borrowers but also on existing borrowers.

Unsecured loans often apply the current base interest rate every 3 or 6 months according to the agreement. For example, if someone borrows 200 million KRW with an unsecured loan and the interest rate rises by 0.5 percentage points, the annual interest increases by 1 million KRW.

A representative from a commercial bank analyzed, "The recent noticeable slowdown in the growth rate of unsecured loans is influenced not only by the stagnation of the stock market but also significantly by the rise in interest rates."

As of the 25th, the outstanding balance of unsecured loans at the five major banks?KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup?was 135.1747 trillion KRW, down by 64.3 billion KRW from last month (135.239 trillion KRW).