Borrowers Who Chose Variable Rates Face a Colder Year-End [The Shadow of High Interest Rates]③

Sharp Rise in Mortgage Loans in Second Half of This Year
COFIX, the Benchmark for Variable Interest Rates, Hits Highest Level This Year
Burden Remains High for Yeongkkeul Borrowers Even with Special BoGeumjari and Didimdol Loans

Despite high interest rates, bank mortgage loans showed a sharp increase starting from the second half of this year. According to financial authorities, the monthly increase in mortgage loan balances was '6 trillion KRW in July → 7 trillion KRW in August → 6.1 trillion KRW in September → 5.7 trillion KRW in October → 5.7 trillion KRW in November,' maintaining a high growth rate each month.

The authorities' interpretation of this is somewhat different. Upon closer examination, the increase in banks' own mortgage loans is actually decreasing. When excluding the Didimdol Loan from the Housing and Urban Fund, policy mortgages, and group loans from the newly issued mortgages by banks, the growth rate of mortgage loans has slowed down. Banks' own mortgage loans were '3.9 trillion KRW in July → 4.1 trillion KRW in August → 3.6 trillion KRW in September → 2.3 trillion KRW in October → 1.7 trillion KRW in November,' showing signs of braking.

The financial sector expects the slowdown in mortgage loan growth to continue for the time being. The 'Housing Market Review' published on the 19th by KB Financial Group Management Research Institute predicted, "With a decrease in sales volume, the special BoGeumjari Loan general type sales ended at the end of September, and the temporary exemption of prepayment fees on household loans in December will increase prepayment amounts (compared to usual), leading to a slowdown in mortgage loan growth."

As the household debt did not increase further as the report anticipated, the burden on Yeonggeuljok (borrowers who borrow to the limit, even to the point of exhausting their resources) does not drastically decrease just because the amount borrowed through policy mortgages is high, according to the financial authorities' interpretation.

Mr. Lee Ju-young (34), who bought an apartment earlier this year through the special BoGeumjari Loan, said, "I borrowed 300 million KRW at an interest rate of 4%, and the principal and interest alone amount to 1.3 million KRW per month," adding, "Although the policy mortgage interest rate is lower than banks', the house prices are so high that the amount to be repaid is fundamentally large, so I have no choice but to reduce my spending."

Mr. Jung Chan-wook (31), who took out a Didimdol Loan, said, "I don't think housing prices will fall further, and the interest rate is in the 3% range, so I took a deep breath and borrowed to the limit, but thinking about repayment makes the future bleak," adding, "Unless an ultra-low interest rate era like before COVID-19 returns, the burden of repaying debt over decades remains the same."

Meanwhile, the Cost of Funds Index (COFIX), which is the benchmark for variable mortgage interest rates, rose again. As of last month, COFIX was 4.0%, up 0.03 percentage points from the previous month (3.97%), marking the highest level this year. A representative from a commercial bank said, "Yeonggeuljok who chose variable interest rates during the past low-interest period will face higher interest burdens at the end of the year."