House Price Drops by 100 Million Won in Less Than a Year After Purchase
Mortgage Loan Interest Rates Rise from 2% to 5% Range
[Asia Economy Reporter Park Hyun-joo] The so-called 'Yeongkkeul-jok,' who borrowed more than half of their house price from financial institutions to purchase homes, are suffering from falling real estate prices and rising interest rates.
A office worker, Mr. A (33), is a Yeongkkeul-jok who bought a 30-pyeong apartment in Daejeon for 700 million won last March, borrowing 450 million won of that amount. In an interview with CBS Radio's 'Kim Hyun-jung's News Show' on the 4th, he said, "Since the high prices kept being updated every month, many around me said, 'If not now, it will be harder later,'" adding, "I made the purchase decision after hearing those stories a lot."
When Mr. A bought the house, the interest rate was in the low 2% range, but the situation changed as rates rose. Currently, the interest rate he is bearing is in the 5% range. Mr. A explained, "Since the interest rates on various loans, including the mortgage, rose all at once, the monthly payment amount increased significantly," adding, "Originally, I paid about 1.8 million won, but now I pay in the mid-2 million won range every month."
As the interest burden increased, Mr. A had to drastically reduce his consumption. He said, "Since almost all the money goes out on payday, I can hardly spend on anything else," adding, "I deleted all dining out and delivery apps and now live eating only ramen at home."
This is not just Mr. A's situation alone. According to the Bank of Korea's 'Weighted Average Interest Rate of Financial Institutions,' the household loan interest rate based on new contracts at deposit banks in September rose by 0.39 percentage points from the previous month to an annual rate of 5.15%. Mr. A said, "Since the interest rate suddenly rose and was immediately felt, everyone is struggling," adding, "Especially those who made gap investments for investment purposes rather than actual residence are having a much harder time."
Falling house prices are also a major concern for Yeongkkeul-jok. The price of the apartment where Mr. A currently lives has dropped by about 100 million won to 600 million won. This happened in less than a year since he purchased it. Mr. A explained, "When I bought it, the price was on an upward trend and rose for several months," adding, "But as interest rates sharply increased, real estate transactions stopped, urgent sales appeared, and prices dropped sharply." He added, "I haven't looked at the house prices for quite some time now," saying, "I only hear about it secondhand and don't even look at the price charts."
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