A man passes by a banner promoting a mortgage loan product in front of a bank in Seoul, July 28. Yonhap
More banks are hiking mortgage interest rates in response to directives from the Financial Services Commission aimed at curbing the ongoing growth of household debt.
Starting Wednesday, NH NongHyup Bank increased its mortgage interest rates by 0.3 of a percentage point. As a result, the annual interest rate on its five-year fixed-rate mortgage has risen from a range of 3.26 percent to 5.66 percent to a new range of 3.56 percent to 5.96 percent.
Starting next Tuesday, Woori Bank will raise the interest rate on its five-year fixed-rate mortgage by 0.3 of a percentage point. The annual rate, previously ranging from 3.62 percent to 4.82 percent, is set to increase to a new range of 3.92 percent to 5.12 percent.
Not only traditional banks but also internet-only banks have joined the move.
KakaoBank raised the spread on its floating-rate mortgages by 0.2 of a percentage point, starting Wednesday.
“This adjustment was made to ensure the stable management of household loans,” a KakaoBank official said.
K bank has also raised the spread on its five-year apartment mortgages by 0.1 of a percentage point, following a similar adjustment made on July 9.
With both traditional and online-only banks raising their mortgage interest rates, the highest fixed mortgage rates are now nearing 6 percent.
As of Tuesday, the five-year fixed-rate mortgage rates at the five major banks — KB Kookmin Bank, Shinhan Bank, Hana Bank, Woori Bank and NongHyup Bank — ranged from 3.11 percent to 5.66 percent.
The rates of floating mortgages have already surpassed 6 percent, ranging from 4.01 percent to 6.52 percent per year.
“As housing prices in Seoul and the surrounding metropolitan area continue to rise, there is a surge in demand for loans before the stricter regulations on the debt service ratio (DSR) takes effect,” an official from one of the major banks said.
The financial authorities plan to roll out the second phase of the tighter DSR rules on Sept. 1, following the first phase that began in February. This phased approach aims to progressively tighten lending regulations.
This plan is part of efforts to curb the rise in household debt amid lingering concerns that the growing debt is putting additional pressure on the country's economy.
According to Bank of Korea data, the total household loan balance of the banks reached 1,120.8 trillion won ($824 billion) as of July 31, an increase of 5.5 trillion won from the previous month, driven primarily by a rise in mortgage loans. This marked the rise for four consecutive months.