Household loan growth continues despite loan tightening
Market interest rates already rising ‘pre-corona level’
“If the interest rate rises by 1%p, the interest burden is 5.4 trillion won”
Citizens pass in front of an automatic teller machine (ATM) at a commercial bank in Jongno-gu, Seoul on the 3rd. yunhap news
Although the government has introduced more stringent regulations to reduce household debt, which has risen to a record high, it is understood that household loans from banks have increased. Although lending rates at commercial banks have already risen to pre-COVID-19 levels, mainly on home mortgage loans, those who went to ‘Young-Chul’ and ‘Investing in Debt’ This means that it is increasing again.
The Bank of Korea also formalized liquidity recovery by announcing its policy to raise the base rate early this year, but this also does not work well. There are also concerns that the will of the government and financial authorities to tighten the ‘money line’ to hold house prices is fueling expectations for the real estate market’s rise.
3.8 trillion won in one month, despite the tightening of regulations
According to the 5 major commercial banks (KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup) on the 3rd, the balance of the main loan was 489.59 trillion won as of the end of last month, an increase of 3.823.7 trillion won from the end of June. After an increase of about 3.76 trillion won in February alone, it wanted to show a downward trend until June (about 650 billion won), but it jumped close to 4 trillion won in July alone. The total household loan balance also increased by more than 6.2 trillion won in one month based on the sharp increase in household loans.
This is a surprising result considering that the financial authorities have tightened household loan regulations since last month, such as expanding the target of the ‘total debt repayment ratio (DSR) of 40%’, where the annual principal and interest repayment amount does not exceed 40% of annual income. Although the threshold for bank loans has been raised since July, led by the financial authorities, the demand for loans has grown again and actual loans have increased.
“House prices rise” expectations drive loans
The analysis suggests that the expectation of a house price increase, which has been in full swing since last year, is not waning. It is said that even if it is difficult to borrow money from the bank, there is a widespread expectation that once you get a loan and buy a house, you can make a bigger profit.
Although the Financial Services Commission is warning that it will take stricter loan management in the second half of the year to meet the annual household loan growth target (5-6% per annum), it is the same reason that loan growth hardly slows down.
In fact, in the recent BOK’s ‘July Consumer Trend Survey’, the housing price outlook index was counted at 129, the highest since February (129). The government’s warning of a ‘real estate peak’ as well as the BOK’s notice of a base rate hike this year are not suppressing the demand for housing purchases.
Some analysts say that the expectation that the BOK will not be able to raise interest rates rapidly in a short period of time is maintaining consumers’ expectations of a rise in housing prices. Considering that the actual fluctuation of the BOK’s base rate is usually 0.25 percentage points, it is highly likely that the BOK’s rate hike this year will be limited to a maximum of 0.5 percentage points.
However, the problem is that the market interest rate, which reflects the base rate hike in advance, is already showing an upward trend. Already, banks are in a state of keeping pace with government regulations by raising lending rates, such as reducing preferential rates. As a result, in June, the interest rate on bank loans rose by 0.05 percentage points to 2.74% per annum, the highest in two years since June 2019 (2.74% per annum).
Graphic = Reporter Shin Dong-jun
“A sharp rise in interest rates is a blow.”
Experts warned that the burden on existing borrowers may also increase if the rate of increase in the future becomes faster as the rate hike has entered a ‘countdown’. In particular, if the asset market, which has been soaring, is accompanied by price adjustments, the impact will inevitably be greater. According to data received by the BOK by Kim Young-jin, a member of the Democratic Party of Korea, the interest burden increases by 1 percentage point when the loan interest rate rises to 5.4 trillion won.
In-ho Lee, a professor of economics at Seoul National University, said, “In the early stages of an interest rate hike, borrowers may not feel the burden of repayment of interest, but the burden will increase steeply as interest rates continue to rise. It is necessary to prepare countermeasures from the beginning to prepare for the number of cases.”
Jo Ah-reum reporter archo1206@hankookilbo.com
Kim Jeong-hyun reporter virtu@hankookilbo.com
Balance to see the world, Hankook Ilbo Copyright © Hankookilbo
.
