Government’s Household Loan Regulations Cause Anger Among Actual Consumers

Due to the government’s household loan regulations, actual consumers who are about to move into pre-sale apartments are expressing ‘anger’ beyond dissatisfaction. The government’s policy failure has led to soaring housing prices and rising interest rates, increasing the interest burden, and as loans have been tightened, the anger of actual consumers is reaching its peak.

According to the financial sector, a law firm’s information about the ‘group loan status’ was posted on an apartment cafe. This cafe is where prospective residents of an apartment in the metropolitan area who will begin moving in in November of this year gather.

Law Firm A explained, “Many complexes are experiencing difficulties in obtaining group loans due to the government’s regulation of household loans and the implementation of the loan cap system due to the rapid increase in household loans.” They added, “Loan applications may be closed on a first-come, first-served basis.”

At the same time, they added, “Currently, the complexes that are moving in are recruiting second-tier financial institutions as much as possible to provide loans.”

A prospective tenant who heard this complained, “Are you saying we should die because it’s a loan from a second-tier financial institution?” They appear to have expressed anxiety over the information that they may have to use loans from second-tier financial institutions, which have higher interest rates than first-tier financial institutions, as they have to borrow hundreds of millions of dollars to pay off the balance.

Law Firm A urged residents to prepare mentally, saying, “In the worst case, the loan may not be processed as planned.”

Law Firm A also mentioned loan interest rates and said, “The additional interest rate has risen sharply due to the government’s regulations on household loans,” and “The additional interest rate has risen to a maximum of 1.5%.” If the additional interest rate goes up, the interest burden on the borrower (the person receiving the loan) increases even if the base interest rate goes down.

Household loan interest rates are largely determined by ‘loan base interest rate + additional interest rate’. The standard loan interest rate uses COFIX, financial bond/CD interest rates, etc. based on banks’ financing costs. The additional interest rate is composed of various factors such as business costs, legal costs, and risk premium, and is determined based on changes in expected loss rate by credit score.

Banks again announced interest rate increases as part of household loan management. Shinhan Bank announced that it will increase the interest rate on mortgage loans by 0.1 to 0.2 percentage points from the 4th of next month. The interest rate for fixed-rate mortgages, where the interest rate is maintained for 5 or 10 years, will be raised by 0.1 percentage points, and the interest rate for floating-rate mortgages (new balance linked to COFIX), where the interest rate will change every six months, will be raised by 0.2 percentage points.

Woori Bank announced that starting from the 2nd of next month, it will increase the variable interest rate on apartment mortgage loans (including transfers) by 0.15 to 0.2 percentage points and the fixed interest rate by 0.2 percentage points.