‘House price high warning’… Will it work this time

A view of a bank in Seoul with a loan product information banner on the 26th. Reporter Hwang Jin-hwanWith the government’s strong regulation on real estate lending and the subsequent increase in the base interest rate, it is attracting attention whether apartment prices will enter a downward and stable trend. The government continues to send warnings about high house prices.

Base rate hike has a cascading effect on housing-related loans

The Bank of Korea announced on the 25th that it would raise the base rate by 0.25 percentage points to 1.00%. The 1% base rate has been set for the first time in 20 months, and the possibility of an additional hike in the first quarter of next year cannot be ruled out.

Accordingly, the burden of repayment of housing-related loans is expected to increase sequentially.

When the base rate rises, the bank’s receiving rate, the COFIX (financing cost index) receiving rate is also affected.

According to the ‘Financial Institution Weighted Average Interest Rate’ statistics released by the Bank of Korea on the 26th, the interest rate on mortgage loans at deposit banks last month increased by 0.25%p from the previous month to 3.26% (based on new transactions).

The effect of this rate hike has not yet been reflected, but it is already the highest figure in two years and 11 months since November 2018 (3.28%). There are even speculations that the highest interest rate on home mortgage loans could exceed the 6% range.
Bank of Korea in Taepyeong-ro, Seoul. Provided by the Bank of KoreaThis is a situation in which financial authorities are tightening loans in earnest, with borrower-level DSR (Total Debt Repayment Ratio) regulations expected to be implemented earlier.

Professor Sung Tae-yoon of the Department of Economics at Yonsei University said, “In addition to the base rate, there are several determinants of mortgage interest rates depending on market conditions such as loan demand. Because the likelihood is high, the risk of buying a home with an additional loan has increased.”

“The worsening of COVID-19 may be a variable, but the overall US economic situation is relatively robust,” he added.

“Caution to buy after” high warning… Buyer Advantage Indicator Map

yunhap newsThis is the reason why the ‘House Price High Warning’ has to be cooler than ever.

On the 24th, Minister of Land, Infrastructure and Transport Noh Hyung-wook appeared on CBS Radio’s Kim Hyun-jung’s news show on the 24th and said, “Based on objective market indicators, house prices seem to have definitely entered a correction phase.

Previously, the government said, “Apartment prices in Seoul were close to their highs before they were adjusted due to the 2008 financial crisis.” (Deputy Prime Minister Hong Nam-ki in June) This is a concern, and it is time to make a serious decision by listening to the future market conditions, liquidity, objective indicators, and opinions of many experts rather than a chase buying based on anxiety.” (Deputy Prime Minister Hong in July) come.

However, the recent high warning is having a more meaningful impact on the market than it was at this time.

While the online real estate community is flooding with questions about the topic of ‘base rate hike and house price forecast’, the buyer’s dominance is being maintained in the market centering on Seoul.

According to the Korea Real Estate Agency, as of the fourth week of this month, the Seoul apartment sales and demand index recorded 98.6, falling for the 11th week and falling below 100 for two consecutive weeks following last week (99.6).

In the weekly statistics of KB Real Estate, a private statistics, the purchasing advantage index of Seoul recorded 60.2, down from the previous week (64.9).