Interest rates went up over the past year… it will go up next year

Judamdae’s variable interest rate is close to entering 8%, with young people tightening their belts
Banks lower spread rates, but interest burden will increase next year



“As of today, interest alone has exceeded 2 million won per month. The end of the year is even more difficult. I have no choice but to tighten my belt and pay the principal as soon as possible.”

Cha Sang-min (39), who bought an apartment in Gongdeok Raemian in Mapo-gu, Seoul two years ago, was heartbroken a few days ago when he received a text message saying that the interest rate on a 470 million home mortgage loan had to win has risen to 6.49 per cent. The interest rate of an unsecured loan of 100 million won has already risen to 7.47%.

When I took advantage of the calculator, the combined interest on both loans was 2.22 million won per month. If you include the principal, you have to repay 3.6 million earned every month. Mr Cha said, “Even in December 2020, when I first took out a loan, the interest rate was in the 3% range.”

Mortgage rates didn’t stop rising until the end of this year. This is because the new COFIX (COFIX, funding costs index), which commercial banks use as a standard when setting variable interest rates, has risen by 2.65 percentage points over the past year.

The COFIX (in November) published on the 15th by the Federation of Banks rose to 4.34%. In January this year (in December 2021), the cofix was 1.69%, which showed a steep increase in the meantime. This is the first time COFIX has exceeded 4% since disclosure began in January 2010. In 12 years and 10 months, the variable interest rate in Judamdae reached its highest level, which means that the interest burden of the Yeongkkul family has increased that much.

The commercial bank’s variable interest rate on mortgage loans is about to enter 8%. As of the 16th, the floating interest rates of the five banks (KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup) recorded 5.19% to 7.72%, reflecting the increase in COFIX the previous day. Compared to January this year, which was in the range of 3% to 5%, it is a jump. In the meantime, financial authorities have put pressure on banks to reduce their lending spreads, and banks have also joined in this direction, but the financial sector explains that the increase in market interest rates is so sudden that it is not is enough for users to feel it.

However, it is very likely that commercial banks will cut the spread again soon. As Lee Bok-hyeon, head of the Financial Supervisory Service, said about interest rate intervention, “Under exceptional circumstances, financial authorities must play a role even if they receive some criticism” (November 28), so we explore the atmosphere.

A commercial bank official said, “We are internally reviewing a plan to adjust the interest rate by lowering the spread rate and increasing the prime rate.” It is in this context that Woori Bank announced that it would reduce the interest rate on jeonse loans by up to 0.85 percentage points this month, and NH Nonghyup also announced that it would reduce the interest rates on jeonse loans by up to 1.1 points percentage of January.

The ‘Difficult March’ of the Youngkkul people is expected to continue next year. This is because the Bank of Korea has no choice but to continue raising the base rate until next year due to the influence of the US Federal Open Market Committee (FOMC), which took a major step (a 0.50 percentage point increase in the base rate). on the 14th. When the Bank of Korea raises the benchmark interest rate, commercial banks’ lending rates and deposit rates also jump. The BOK’s first meeting on next year’s monetary policy direction to decide on the base rate will be held on January 13th.

Correspondent Shim Na-young


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