Starting next month, a new regulation will prevent banks from passing on certain costs to borrowers in their mortgage interest rates. However, it is expected that borrowers will not see a significant change in their interest burdens. While legal costs will be excluded, banks are likely to offset any potential rate reductions through adjustments in their additional interest rates and reductions in preferential rates for household loans.
The Financial Services Commission announced on June 28 that starting July 1, amendments to the Banking Act and its enforcement decree will limit how banks can reflect costs such as reserve requirements, deposit insurance premiums, and contributions to guarantee institutions in borrowers' interest rates.
Previously, banks included these legal costs in their additional interest rates when calculating loan rates for various types of loans. With the new regulations taking effect, the government anticipates a maximum interest rate reduction of 0.21 percentage points, depending on the product.
However, experts predict that borrowers may find it difficult to feel the impact of this rate reduction. Banks are managing multiple legal costs as a single additional interest rate category and have recently been reducing preferential rates and adjusting additional interest rates to strengthen household loan management.
Currently, KB Kookmin Bank and NH Nonghyup Bank have restricted access to MCI and MCG memberships, while Woori Bank has eliminated preferential rates for mortgage loans. IBK Industrial Bank and NH Nonghyup Bank have also reduced preferential rates and increased interest rates. With the highest mortgage rates among major commercial banks reaching the mid-7% range, the anticipated reduction effects appear limited.
An official from a major bank stated, "While the amendment to the enforcement decree changes how legal costs are reflected in interest rates, banks must also consider overall household loan volume and soundness management. Since the final loan rates are determined by market rates, additional interest rates, and preferential rates, the reduction that consumers actually experience is unlikely to be substantial."
* This article has been translated by AI.
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