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friendly economic time. Today (the 13th), I will be with reporter Kim Hye-min. We've been giving a lot of news that the base rate was frozen yesterday, but reporter Kim, we talk a lot about the base rate. However, in reality, some of you may not know exactly what the base rate is and how it is determined. You want me to explain that a little bit today?
Recently, the base rate has been either frozen or raised. I hear this often. However, many people do not know how the base interest rate is set and how it affects the household economy.
So, today, I will explain the base rate in an easy and friendly way. It is the members of the Monetary Policy Committee of the Bank of Korea that determine the base rate.
The 'Monetary Policy Direction Decision Meeting' is held eight times a year and decisions are made in consideration of inflation and domestic and international economic conditions. One of them was yesterday, and as you saw in the article, it was frozen this time.
So, how do you determine the base rate? Even before the base rate decision meeting, the executives of major departments of the Bank of Korea hold several informal meetings. A trend report meeting is also held the day before.
At this meeting, working-level staff make a comprehensive report on the domestic and foreign economic situation to the members of the Monetary Policy Committee. In addition, the interest rate is decided through discussion among members at the decision meeting.
It is through this process that the base rate is determined. But what we call interest rates is interest. When you take out a loan and sign a contract for interest, there is also a base rate. There is another thing called an interest rate spread. What is the difference between these two?
First of all, the base rate is now 0.75%, but when we go to the bank, we do not provide loans at this rate. You have to pay a much higher interest rate.
So, the base rate is the interest rate used when the Bank of Korea lends money to commercial banks. When commercial banks make loans to individuals, they attach an additional interest rate to the cofix, which is affected by the base rate, and this is called an additional interest rate.
Of course, as those who have taken out loans know, if you make a credit card or deposit money, some of the interest rates are subtracted as a preferential interest rate.
This is how the bank's loan interest rate is determined. Therefore, when the base interest rate rises, the loan interest rate and bank deposits also rise with a lag.
right. But as it is always talked about, banks unilaterally set additional interest rates. However, please do not disclose this transparently. First, let's go back to the base rate. You froze it yesterday. But one more time left, it will be decided within this year. Is there any possibility to upload it next time?
As I explained earlier, a meeting is held to decide whether to raise the base rate eight times a year. I did it 7 times so far yesterday. We now have our last meeting of the year left on the 25th of next month.
Governor Lee Ju-yeol said that he could consider further raising interest rates at the next meeting. The market expects the November hike to be certain to some extent.
In addition, there are predictions that the rate will be increased once more early next year. If interest rates rise like this, it will put a burden on the loan interest rate for individuals.
The Bank of Korea recently published a report, and if the base interest rate is raised by 0.25 percentage points, the interest to be paid per borrower per year increases by an average of 150,000 won. In addition, it was predicted that 300,000 won would jump every 0.5 percentage point increase.
The base interest rate will rise several more times in the future, and the loan interest rate can be quite burdensome for those who invest with debt. Now is the time to sort out your loans little by little.
reporter Kim explained, if the base interest rate rises, the interest on the loan will also increase. I know you'll have to pay a lot. However, if the debt repayment burden increases, the rate of increase in household debt decreases. That the results of this investigation came out.
There is data that tells you how economic indicators change when the base interest rate is raised. At first glance, it was found that in the long run, when the base rate rises, the growth rate of household debt decreases.
When the base rate was raised by 0.25 percentage points, household debt growth fell by 0.4 percentage points.
Maybe it's because people are worried about high interest rates, so they cut back on their loans.
In addition, consumer price inflation and house price growth both fell.
Of course, a theory is just a theory.
Past examples may not fit perfectly with the present.
In particular, the overheated housing market can be a variable recently. If there is an expectation that house prices will continue to rise, even if interest rates rise, house prices can rise as well.
At the MPC meeting in August, there was also an opinion that "we are skeptical about whether we can control the volatility of housing prices by slightly raising the base rate."
In fact, while mortgage rates have risen over the past year, home prices have risen along with them rather than going down.
It remains to be seen whether the formula of raising interest rates and controlling lending to control real estate prices will work again this time.Keywords: interest rate, kim hye-min, reporter, banks, monetary policy committee, members, base rate, bank of korea, economy, base rate freeze, rate.so, friendly, lot, economy.so, loans