Reliable Conversion Loan, lower than expected application… “Possibility of interest rate rise until early next year, profit or loss must be weighed”

The application for a favorable secured conversion loan, which can convert a variable home mortgage loan to a fixed interest rate of at least 3.8% per annum (3.7% for low-income youth), begins in the second week of the application with a lower response. than expected. Consumers seem hesitant to choose because the range of conversion targets is narrow and the interest burden of floating rate products is currently lower. Experts advise taking into account that an increase in interest rates is applied with a delay and there are many prospects for interest rates to rise at least until next year.

According to the Korea Housing Finance Corporation on the 18th, a total of 238.6 billion won and 2406 applications were made during the first day of the application for a favorable type safe conversion loan on the 15th. This is less than 30% of the results on the first day of the application (833.7 billion won, 7222 cases) for the low income group, which came out in October 2019. The results will be on the second day, the 16th , will be released around the 19th.

In response to the sluggish performance on the first day, the financial authorities said that the preferred safe conversion loan limit and target (up to 250 million won, combined income of a married couple 70 million won, price the housing market 400 million won) has been reduced to low. -income-type secured conversion loan (up to 500 million earned, 85 million earned, 500 million earned) He pointed out that it is more difficult and that houses with a market value of more than 300 million won are eligible to apply until the end of this month. As the five-part system, which allows different days of the week to apply depending on the year of birth, is implemented, it is necessary to wait until the middle of this week. An official from the Financial Services Commission said, “We will reach our target of 25 trillion won by the deadline, October 17.”

In addition, the interest rate on the current mortgage loan is still below the minimum interest rate for a secured conversion loan of 3.8% per annum, so the incentive to apply is considered to be weak. The mortgage loan that can be converted into a secured conversion loan is a variable rate or semi-fixed (mixed) rate product executed before August 17 this year.

However, experts advise that lenders should consider the period and timing of the application of the COFIX (Funding Cost Index), which is the representative standard interest rate for various mortgage loans held by borrowers. For example, if you got a six month mortgage loan linked to a Cofix interest rate based on the new treatment amount in March this year, the new Cofix interest rate will be reflected in the following month. The COfix interest rate rose sharply this year, rising 1.32 percentage points from 1.64% at the start of this year to 2.96% in August based on the new transaction amount.

It is also worth considering the possibility that the rate increases in the United States and South Korea will continue through next year. It is certain that the US Federal Reserve (Fed) will raise the interest rate by 0.75 percentage points at a time at the Federal Open Market Committee (FOMC) on the 21st (local time). The Bank of Korea is also very likely to raise the key interest rate by 0.25 percentage points each at the Monetary Policy Committee in October and November this year to stem capital outflows and weaken the money earned, as well as curb inflation domestic. of a 0.5 percentage point increase in the base rate) is also discussed. The BOK’s increase in the base rate leads to an increase in the Cofix rate and the interest burden on borrowers of variable mortgage loans.

An official from the financial authorities said, “There is a possibility that borrowers who have confirmed that the interest rate on the current home mortgage loan has been more than 3.8% per annum will be flocked until the end of the application period. Please compare them.”

Consumers can switch to a fixed type product this time, and then switch back to a floating product when the market interest rate falls again or an interest rate cut comes after a few years. If 3 years have passed since the loan was granted, no prepayment fee will be paid. Park Chang-gyun, senior research fellow at the Capital Market Research Institute, said, “Currently, interest rates for fixed-type products are 0.50 to 1.00 percentage points higher than those for floating-type products, but this can be seen as an ‘insurance premium’ which removes the risk of interest rate rises. We should be able to choose the older brother freely.”