The upper limit for mortgage rates at banks has surpassed 7.5%. With the increase in the base rate and stricter management of household loan volumes, the highest mortgage rates at major commercial banks are rising 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 the end of May, when rates were between 4.26% and 7.10%, with the lower limit rising by 0.53 percentage points and the upper limit by 0.42 percentage points.
The rapid rise in market interest rates is attributed to the Bank of Korea's shift to a tightening monetary policy for the first time in three and a half years. The five-year bank bond rate, a key indicator for fixed-rate mortgages, increased from 4.207% to 4.478%, a rise of 0.271 percentage points during the same period.
Variable mortgage rates are also on the rise. The five major banks' six-month variable mortgage rates are reported to be 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 expected 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 loan limit from 600 million won to 300 million won this month. Shinhan Bank and Hana Bank are also limiting 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, which had been considered 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 mortgage loans 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 has led to 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 anticipated that banks will raise the thresholds for mortgage loans, jeonse loans, and credit loans.
A financial industry official stated, "As interest rates rise and obtaining loans becomes more difficult, there may be an increase in cases where individuals need to revise their plans for purchasing homes or securing funds. Given the possibility of further rate hikes, it is essential to assess repayment capacity based on anticipated interest rate increases."
* This article has been translated by AI.
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