[1mm Financial Talk] Inbaeng Mortgage Loans Reach 6 Trillion Won... Will Interest Rates Stay in the 3% Range?

Demand for Refinancing Loans Exceeds Half, Increasing Throughout the First Half of This Year Led by Interest Rates in the 3% Range

The outstanding balance of mortgage loans at KakaoBank and K Bank is expected to reach around 6 trillion KRW by the end of the second quarter. This is the result of attracting a large number of refinancing customers from commercial banks since the beginning of this year by offering interest rates in the 3% range. Among first-tier banks, they are the only ones still providing fixed mortgage loan interest rates in the 3% range.

On the 21st, KakaoBank announced that its mortgage loan balance exceeded 3 trillion KRW as of April. Recently, mortgage loans in the banking sector have been on the rise, and between January and March this year alone, KakaoBank’s mortgage loan balance increased by 1.16 trillion KRW (from 1.196 trillion KRW at the end of Q4 last year to 2.356 trillion KRW at the end of Q1 this year). Considering this, the financial sector predicts that the balance could have risen to around 4 trillion KRW by the end of Q2. KakaoBank will disclose the exact figures when it releases its earnings report on the 2nd of next month.

K Bank’s apartment mortgage loan balance stood at 2.4 trillion KRW as of the end of June. A K Bank official stated, "The apartment mortgage loan balance increased by 1.4 trillion KRW in the first half of this year alone," adding, "It remains the most popular product among K Bank customers."

One characteristic of internet banks’ mortgage loans is that many refinancing customers have moved from commercial banks to these banks. For KakaoBank, refinancing loans accounted for 54% of the total mortgage loans as of the end of Q2. Similarly, refinancing demand made up about 50% of K Bank’s total apartment mortgage loans.

An internet bank official explained, "When buying a house for the first time, many customers find banks through loan brokers introduced by real estate agencies and often want to consult with bank branches due to lack of experience. However, once they have taken out a mortgage loan, interest rates become the most important factor, so they look for places with even 0.1 percentage points lower rates, which has increased the proportion of refinancing loans at internet banks."

Throughout the first half of this year, interest rates in the 3% range symbolized internet banks’ mortgage loans. Because they have no branches and fewer employees, operating costs are lower, allowing internet banks to offer lower rates than commercial banks. While the 3% interest rate has disappeared from commercial banks, internet banks still maintain 3% range rates for fixed-rate mortgages.

As of the 21st, KakaoBank’s fixed-rate mortgage interest rates range from 3.75% to 6.38%. K Bank’s fixed-rate apartment mortgage interest rates range from 3.98% to 5.02%. A financial industry insider said, "The benchmark for mixed-rate loans is the 5-year financial bond yield. Due to the Saemaeul Geumgo incident earlier this month, financial bond yields rose but have been stabilizing since last week. Whether the 3% range interest rates can be maintained will depend on the future trend of financial bond yields."

The lowest variable mortgage interest rate is in the 4% range. Variable rates have been affected by the rise in COFIX (Cost of Funds Index), which serves as the benchmark. KakaoBank’s variable rates range from 4.06% to 6.829%, and K Bank’s range from 4.18% to 6.03%.