[Editor's Pick] Interest Rates Rise Even Before Official Hike: "It's Heartbreaking," Say Debt-Burdened Borrowers

Lee, a 40-year-old leather repair shop owner, is worried after receiving a text message that his jeonse (lump-sum housing lease) loan interest rate will rise by 0.12 percentage points starting next month.

[Lee / Self-employed : Since I cannot pay off the jeonse loan, I have no choice but to continue living while paying high interest, which is a heavy burden....]

The 5-year fixed mortgage rates at the five major commercial banks were recorded at 4.46% to 7.49% per annum, while jeonse loan rates ranged from 3.19% to 5.89%.

Compared to the end of last month, two weeks ago, the upper end of mortgage rates jumped by 0.39 percentage points, and the upper end of jeonse loan rates rose by 0.33 percentage points.

The rise in bank loan rates is due to the upward trend in market interest rates.

As the bond market anticipates that the Bank of Korea will raise the base interest rate to combat high inflation caused by the war in the Middle East, the yields on bank debentures, which serve as the benchmark for calculating loan rates, are rising.

Credit loan rates are also surging.

The 1-year variable credit loan rates at the five major commercial banks were recorded at 4.92% to 6.22% per annum, with the upper end already surpassing 6%.

As the upward trend in loan rates continues, the interest burden on those who have maxed out their borrowing capacity to buy homes or invest in stocks is growing.

For example, if one borrowed 300 million won for a mortgage with a 30-year maturity and equal principal and interest repayment at an annual rate of 4%, the monthly payment would be approximately 1.43 million won. However, if the rate rises to 6%, the monthly payment increases to approximately 1.79 million won.

[Lee Jung-hee / Professor of Economics, Chung-Ang University : It appears to be the aftermath of the war involving Iran and other factors. As high inflation persists, the trend toward interest rate hikes is returning, and with our high levels of household and corporate debt, the financial burden is growing....]

Despite the rising loan rates, demand for housing and stock investments has continued, leading to an increase of over 9 trillion won in household loans in the financial sector last month, primarily driven by credit loans.

In response, financial authorities have activated an emergency management system for household debt, and banks are raising the bar for credit loans by reducing limits.

Reported by Kim Hye-min | Written by Kim Da-yeon | Video Editing by Kim Yoon-sung | Design by Choi Jae-young | VJ by Jung Han-wook | Produced by SBS Digital News
※ Please note: This article was translated by AI and may contain errors.