As of May 19, the fixed mortgage rates at five major banks—KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup—are reported to range from 4.47% to 7.07%.
The upper limit of mortgage rates reached 7% just a month after the outbreak of conflict between the U.S. and Iran, but fell to between 4.15% and 6.75% by mid-April as tensions eased. However, persistent international oil prices and inflation concerns have pushed rates back above 7% in just six weeks. The benchmark financial bond rate, which influences fixed mortgage rates, reached 4.279% on May 15, marking the highest level in two years since April 2024.
With increasing pressure for interest rate hikes, the upward trend in loan rates may accelerate. Yoo Sang-dae, Deputy Governor of the Bank of Korea, indicated during a press conference on May 3 that it is time to consider raising rates. Even if the benchmark rate does not increase immediately, market expectations of a hike could lead to rising market rates, which would affect loan rates.
As rates climb, borrowers are likely to face greater interest burdens. An increase of 0.25 percentage points in loan rates could raise the interest burden on household borrowers by 3.2 trillion won, averaging about 163,000 won per borrower annually, according to a Bank of Korea survey.
Borrowers with variable-rate loans may see their repayment burdens increase more quickly, as market rate fluctuations are reflected in their loan rates. According to the Bank of Korea's economic statistics system, the proportion of variable-rate mortgages among new loans issued in March rose to 39.2%, a 10.3 percentage point increase from the previous month and the highest level since June 2022.
A financial industry source noted, "Concerns about rising prices are resurfacing, and the likelihood of the Bank of Korea raising interest rates is increasing. It seems unlikely that the upward trend in loan rates will ease in the short term."
* This article has been translated by AI.
Copyright ⓒ Aju Press All rights reserved.