The upper limit for mortgage rates at banks has surpassed 7.5%. With the rise in the base rate and stricter management of household loan volumes, the highest mortgage rates at major commercial banks are increasing rapidly. As banks raise their lending thresholds, the financial burden on actual borrowers has intensified.
As of July 21, the five major commercial banks—KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup—reported fixed-rate mortgage rates ranging from 4.79% to 7.52%. This marks an increase from 4.26% to 7.10% at the end of May, with the lower limit rising by 0.53 percentage points and the upper limit by 0.42 percentage points.
The Bank of Korea's shift to a tightening monetary policy for the first time in three and a half years has led to a rapid increase in market interest rates. The five-year bank bond rate, a key indicator for fixed-rate mortgages, rose from 4.207% to 4.478% during the same period, an increase of 0.271 percentage points.
Variable mortgage rates are also on the rise. The five major banks reported six-month variable mortgage rates between 4.17% and 6.88%, reflecting a three-month consecutive increase in the COFIX rate, a key benchmark for variable loans.
The upward trend in loan rates is likely to continue for the foreseeable future. The Bank of Korea may implement up to two additional rate hikes this year, and banks are raising spreads or reducing preferential rates to manage household loan volumes.
In this environment of rising rates, banks are also increasing their lending thresholds, creating additional challenges for actual borrowers. KB Kookmin Bank has reduced its mortgage limit from 600 million won to 300 million won this month. Shinhan Bank and Hana Bank have also restricted applications through loan brokers. Woori Bank has cut its monthly loan limit for housing-related loans from 3 billion won to 1 billion won per branch.
Even SC First Bank, previously seen as a last resort among first-tier banks, has closed its lending window. The bank is currently not accepting new applications for general mortgage loans until the end of October. It has become increasingly difficult to secure new mortgages across the banking sector.
As of July 15, the outstanding balance of household loans at the five major banks, excluding policy loans, was reported at 649.6612 trillion won, an increase of 4.6912 trillion won from 644.970 trillion won at the end of last year. These banks have already exceeded their annual household loan growth target of approximately 4.34 trillion won, which they submitted to the Financial Supervisory Service at the beginning of the year, by about 350 billion won. This is why there are expectations of stringent loan management throughout the second half of the year.
According to the Bank of Korea's recently released 'Financial Institution Loan Behavior Survey Results,' the loan attitude index for domestic banks in the third quarter was recorded at -7, down 5 points from -2 in the previous quarter. A lower index indicates stricter loan assessments by banks. It is expected that banks will raise the thresholds for mortgage loans, jeonse loans, and credit loans across the board.
A financial sector official stated, “As interest rates rise and obtaining loans becomes more difficult, there may be an increase in cases where individuals need to reassess their plans for home purchases or financing. Given the possibility of further rate hikes, it is essential to evaluate repayment capacity based on anticipated interest rate increases.”
* This article has been translated by AI.
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