Interest rate hike cycle to continue in the second half of the year even if there is a pause in monetary policy in the second quarter
[아시아경제 박선미 기자] Amid the prospect that the Bank of Korea’s interest rate hike cycle will continue, there are also signs that the proportion of floating rate loans in banks will change.
In the financial sector on the 15th, the prevailing outlook is that monetary policy will continue to normalize in the second half of the economic expansion phase. Kim Ye-in, a researcher at Korea Investment & Securities, said, “With the March presidential election and the resignation of Lee Ju-yeol, president of the Bank of Korea, a pause in monetary policy in the second quarter is realistically inevitable, but the interest rate hike cycle will continue in the second half of the year. This is because the cycle of rate hikes tends to continue,” he said.
The BOK raised the key interest rate by 25 basis points as expected the previous day. After three interest rate hikes since the second half of last year, the base rate has now returned to the pre-COVID level at 1.25%.
With an additional base rate hike in mind in the second half of the year, more borrowers are choosing to choose a fixed (mixed) rate instead of a variable rate when issuing new loans.
An official from a commercial bank said, “Last year alone, most loan customers looked for variable interest rate products, but now the atmosphere has completely changed to the extent that 80 to 90 percent of them are looking for fixed interest rates.” Another bank official said, “Some customers choose the fixed type after consulting with the staff about whether it is advantageous between the fixed interest rate and the variable type when receiving a new loan. More and more people are making the decision and proceeding with the loan,” he said.
According to the banking industry, the interest rates on new fixed-rate mortgages for Kookmin, Shinhan, Hana, and Woori Banks are 4.01 to 5.21%, 3.78 to 4.59%, 3.83 to 5.13%, and 4.14 to 5.54%, respectively. Shinhan Bank has the lowest interest rates at both the top and bottom of the four major banks. In the case of Shinhan Bank, the variable main loan interest rate is 3.64~4.69%, which is higher than the fixed type, which is a ‘reversal’ phenomenon, which is a situation in which the number of customers who prefer fixed rate products is increasing.
Until last year, 8 out of 10 new borrowers chose variable interest rate products with lower interest rates. According to the Bank of Korea, as of the end of November last year, 82.3% of new household loans followed the floating rate.
The industry believes that there is a high possibility that banks will promote the sale of fixed-type products rather than variable-rate products in order to increase the interest burden and manage soundness due to the rise in loan interest rates.
By Park Seon-mi, staff reporter email@example.com