Second-half policy rate hike formalized; upper end of mortgage rates 7enters the percent range, increasing the burden on households
The Bank of Korea has formalized a policy rate hike in the second half of the year. 5 banks’ fixed-rate mortgage rates were recorded at an annual 4.26~7.10%, while COFIX and financial bond rates have also risen, increasing the burden of both variable- and fixed-rate loans.
The Bank of Korea has formalized a policy rate hike in the second half of the year. The announcement is expected to have repercussions in the housing market.
Fixed-rate mortgage rates at banks (5 years) stood at an annual rate of 29 as of 4.26~7.10%. The rate range varies by bank.
The COFIX for new transactions reversed course and rose to 2.89%. The previous month’s figure was 2.81%. Variable rates on products tied to COFIX may rise.
Financial bond 5-year rate also stood at an annualized 4.280 percent. This was 0.042percentage points higher than the previous reading. Rising financial bond rates are reflected in the calculation of fixed-rate loan rates.
In general, when interest rates rise, the burden of loan interest increases. This may dampen the buying sentiment of end-user buyers and investors. The article explains that a decline in transaction volume could lead to a correction in home prices.
During the period of continued low interest rates, in 2021, at an annual rate of 2~3% range mixed-rate (5-year) mortgage borrowers are expected to face a heavier interest burden when their rates are reset. The article pointed to the increased burden on these borrowers. It also included a specific example.
The article gave an example, stating that if a rate reset applies, the monthly payment would rise from 299ten thousand won to 100ten thousand won more. It noted that this calculation may vary depending on the loan terms.
Sources: 뉴시스 경제
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