Mortgage Rates Keep Rising Overnight... "Youngkeuljok" Face Growing Worries

Variable-Rate Mortgage Loan Interest Rates Climb at Major Banks
COFIX Sees Largest Increase in Three Years
Household Loan Regulations Expected to Continue Next Year

The variable-rate mortgage loan interest rates at major commercial banks are soaring. On top of this, household loan regulations by financial authorities are expected to remain in place for the foreseeable future, deepening concerns among so-called "youngkkuljok"-those who have stretched their finances to the limit to buy homes.

As of the 16th, the variable-rate mortgage loan interest rates at the four major banks (KB Kookmin, Shinhan, Hana, and Woori) ranged from 3.98% to 5.825% (based on the new loan COFIX rate; Shinhan uses the 6-month financial bond rate). Compared to November 18 of last month (3.82% to 5.764%), the lower end has risen by 0.16 percentage points, while the upper end has increased by 0.061 percentage points.

The rise in variable-rate mortgage loan rates is due to the Cost of Funds Index (COFIX) continuing its upward trend for the third consecutive month. Last month, the COFIX rate for new loans stood at 2.81%, up 0.24 percentage points from the previous month. This marks the largest monthly increase in three years since November 2022, when it rose by 0.36 percentage points.

COFIX is the weighted average interest rate of funds raised by eight domestic banks. It rises when the interest rates on deposit products such as savings and time deposits, as well as bank bonds, actually handled by banks, are increased. With the stock market booming, funds are flowing into capital market investments, causing demand deposits-which are low-cost funding sources for banks-to move to securities firms as customer deposits. As a result, banks are raising deposit interest rates to secure funding stability.

Internet banks, once dubbed "interest rate hotspots" for their competitive rates, are also seeing their mortgage rates soar. According to K Bank, as of today, the variable-rate apartment mortgage loan interest rates range from 4.23% to 7.89%, with the upper end approaching 8%. Compared to last month (4.06% to 7.72%), both the upper and lower ends have risen by 0.17 percentage points.

At KakaoBank, the variable-rate mortgage loan interest rates stand at 4.094% to 5.92%. Compared to November 18 of last month (3.85% to 5.561%), the lower end has increased by 0.244 percentage points and the upper end by 0.359 percentage points. Due to the impact of household loan regulations and other factors, internet banks have recently been maintaining interest rates similar to or slightly higher than those at commercial banks.

Within the banking sector, there is an expectation that both deposit and loan interest rates will continue to rise, considering the ongoing upward trend in bond yields. Moreover, as financial authorities strengthen their stance on household debt management regulations, banks have little incentive to engage in aggressive mortgage rate competition. A bank official commented, "Financial bond rates continue to rise, and with regulatory measures expected to persist next year, it will not be easy for banks to expand their mortgage loan operations."