Apartment complexs in central Seoul, Tuesday / Yonhap

Samsung Life Insurance and Samsung Fire & Marine Insurance, the respective leading companies in the country's life and non-life insurance sectors, have raised their interest rates on mortgages, joining a move by banks in response to financial authorities' increasing pressure to curb the growth of household debt.

The latest action by the major insurance companies is widely seen as their intention to prevent a so-called balloon effect, meaning that mortgage demand could shift to insurance companies, which are subject to relatively looser government regulations.

Samsung Life raised its rates by an average of 0.2 percent on Wednesday.

According to the rates published on the firm's website, the figures for non-face-to-face loans ranged from 3.49 percent to 4.79 percent, but the rates for face-to-face loans disclosed to the Financial Supervisory Service (FSS) were slightly higher, ranging from 3.59 percent to 4.94 percent. This means the actual interest rates customers will receive when applying for a loan will be on average 0.2 percent higher than before, according to industry officials.

Samsung Fire raised its rates by 0.49 percent on Monday. As a result, its rates have increased to a range of 3.68 percent to 6.13 percent.

These rate hikes came at a time when banks have implemented various measures to curb the growth of housing loans, ranging from raising interest rates to reducing loan terms and limits.

This led the lower end of interest rates on mortgages offered by insurance companies to fall below those of banks for the first time in 10 months.

According to the financial watchdog's data, Thursday, if a mortgage is set for a property worth 300 million won ($225,000), with a loan amount of 100 million won, a 30-year term and a fixed interest rate, Samsung Life's mortgage rates range from 3.59 percent to 4.94 percent. In contrast, the rates offered by major banks were recorded at 3.63 percent to 6.03 percent.

With the industry leaders in the insurance sector initiating interest rate hikes, attention is now focused on whether other firms will join the trend.

Raising interest rates is an effective way for these businesses to enhance their returns in terms of asset management.

Now that they have gained justification by aligning with the government's policy to manage growing household debt, it is cautiously expected that it is only a matter of time before other insurers follow suit.

Some, however, also express concerns, as FSS Governor Lee Bok-hyun recently criticized the banks' interest rate hikes, describing it as an “easy” way out to comply with the authorities' instruction to curb the growth of household loans.

“Rather than making overt adjustments to interest rates, we plan to manage mortgages through other measures, such as tightening loan screening processes,” an official from one of the major life insurance companies said.