K-Bank Launches Korea's First Adamdae 5-Year Cycle Type in Internet Banking

From a Minimum Annual Rate of 3.61%

K Bank announced on the 30th that it has launched a 5-year cycle-type apartment mortgage loan. It is the first internet bank to offer a cycle-type apartment mortgage loan.

A cycle-type loan features interest rates that change at regular intervals, and once the interest rate is set, it remains fixed until the next cycle. This type of loan is characterized by a lower burden of principal and interest repayment due to unexpected interest rate increases during the loan period.

For this product, the interest rate is fixed for the first 5 years after the initial loan. After 5 years, if the interest rate changes, the new rate is maintained for another 5 years, and this cycle continues until maturity (which can be selected in 5-year increments between 20 and 40 years).

The benchmark interest rate for K Bank’s cycle-type apartment mortgage loan uses the 5-year government bond rate. As of this date, the loan interest rate ranges from 3.61% to 5.84% per annum.

The cycle-type loan has a significant advantage in loan limits compared to fixed-mixed or variable interest rate loans, especially following the introduction of the ‘Stress DSR (Debt Service Ratio)’ in February.

The Stress DSR is a system that applies a certain level of stress interest rate when calculating the DSR for customers using variable interest rate loans, to prevent increased household burdens caused by sudden interest rate hikes. Since cycle-type loans carry less risk from interest rate fluctuations, they receive preferential treatment in stress rate application, resulting in higher loan limits than variable interest rate loans.

For example, according to the Financial Services Commission’s announcement at the end of last year, a customer with an income of 100 million KRW (loan limits may vary depending on the customer) applying for a 30-year maturity installment loan would have current loan limits of 630 million KRW for variable interest rate, 641 million KRW for fixed-mixed, and 649 million KRW for cycle-type loans. Starting next year, the limits will be 556 million KRW for variable, 594 million KRW for fixed-mixed, and 625 million KRW for cycle-type loans. If a customer borrows the same amount next year, choosing the cycle-type loan will increase the maximum loan limit by more than 10%.

A K Bank official stated, “The cycle-type apartment mortgage loan allows for stable fund management even if interest rates rise, and it also offers the advantage of higher loan limits. We will support customers in reducing household interest burdens and managing funds systematically with our competitively priced cycle-type apartment mortgage loan.”