As the Monetary Policy Committee of the Bank of Korea (the Monetary Policy Committee) raised the base rate by 0.50 percentage points today (12th), the base rate jumped 2.50 percentage points from 0.5% to 3.00% per annum for about one year and two months since August last year. I did.
Accordingly, even if the loan interest rate rises only by the extent of the base rate hike, it is estimated that household borrowers' interest burden will increase by more than 33 trillion won.
Moreover, as expected, if the base interest rate rises by 0.25 to 0.50 percentage points by the end of the year, it is the 'young' (soul) who has aggressively purchased assets using leverage (borrowed investment) in the past two years with vulnerable groups such as multiple debtors, 20 and 30 generations, and the self-employed. The burden of repaying the principal and interest of the 'debt-tuning' (investing with debt) family is expected to increase.
As the base interest rate rises, the cost of financing for financial institutions such as banks increases, and the interest rate that financial institutions apply to consumers will inevitably rise.
According to data on household debt that the Bank of Korea recently submitted to Rep. Kang Jun-hyeon (and the Democratic Party) belonging to the National Assembly Planning and Finance Committee, even if the base rate jumps by 0.25 percentage points, the interest of all borrowers will increase by about 3.3 trillion won.
If the increase is 0.50 percentage points, the increase will increase to 6.5 trillion won.
This is the result calculated by applying the estimate of the proportion of floating rate loans from banks and non-bank financial institutions (average 74.2%) to the household loan balance as of the end of the second quarter of this year.
In August of last year, the MPC raised the base interest rate, which had been lowered to the record low level (0.50%), by 0.25 percentage points for the first time in 15 months. (0.25% points × 10) As the increase was, only the interest increased for about one year and two months is estimated at KRW 33 trillion (KRW 3.3 trillion × 10).
In addition, the Bank of Korea analyzed that if the base rate is raised by 0.25 percentage points, the annual interest burden per household borrower will increase by about 164,000 won on average.
Since August of last year, 2.5 percentage points jumped, ten times the 0.25 percentage point, so the annual interest of each borrower also increased by 1.64 million won.
In a report on financial stability on the 22nd of last month, the BOK said, "We should be careful about the possibility of realizing potential risks from rising interest rates." "As interest rates rise, the burden of repaying debts is aggravating, low-income, small-scale self-employed, and vulnerable borrowers (low-income and low-credit among multiple debtors)" The risk of insolvency will increase mainly in vulnerable sectors such as , excessive borrowers and marginal companies,” he warned.
As of the 30th of last month, the interest rates of the four major commercial banks (KB Kookmin, Shinhan, Hana, and Woori) are at the level of 4.730-7.141% per annum for mixed (fixed) mortgage loans.
As the interest rate on 5-year bank bonds (AAA, no guarantee), which is mainly used as an indicator of the mortgage-type hybrid interest rate, continues to rise under the influence of the US and Korea's faster-than-expected tightening outlook, some banks' mortgage-type hybrid interest rates have risen for the first time in about 13 years. is over 7%.
The variable interest rate for mortgage loans (linked to new Cofix, 4.510 to 6.813% per annum) and credit loan rates (grade 1, 1 year, 5.108 to 6.810% per annum) also approached the 7% range.
Moreover, lending rates are likely to rise further by the end of the year.
The banking sector and the market expect the Monetary Policy Committee to raise the key interest rate for the sixth consecutive month in response to a series of giant steps in the United States.
If you take a big step (a 0.50% point increase) following this month, it means that the base rate will rise to 3.50% within the year, and 3.25% even if it is just a baby step.
Therefore, even if the loan interest rate rises by the end of the year by the extent of the increase in the base rate in October and November (0.75 to 1.00 percentage points), the loan rate, which is currently around 7%, is likely to approach 8% within this year for the first time in about 14 years since the financial crisis.
If the loan interest rate rises so quickly, it is expected that the annual repayment amount will surge by more than 50% at the end of this year or early next year, especially among borrowers who bought assets based on the ultra-low interest rate two years ago.
According to an analysis of the borrower case of one of the five major commercial banks, Mr. A (credit rating 3), an employee of a large corporation, borrowed 566 million won from a bank two years ago (October 2020), Mapo Raemian Prugio, Mapo-gu, Seoul. Purchased (1.43 billion won) of 24 pyeong (exclusive area of 59.96㎡).
The total loan amount of Mr. A is a housing mortgage loan of KRW 466 million (30 years of equal amortization of principal and interest. New handling amount Cofix 6-month interlocking rate) and a credit loan of KRW 100 million (loan period of one year. The term can be extended every year. 6-month interest rate on financial bonds) is added, and it is 566 million won.
The interest rate applied to Mr. A for the first 6 months was 2.91% per annum for the mortgage loan and 3.66% for the credit loan, and the monthly principal and interest repayment amounted to about 2,247,000 won (the principal and interest of the mortgage loan: 1942,000 won + credit loan interest of 305,000 won) ) level.
However, as of this month, two years later, the interest rates on mortgages and credit loans have risen to 5.07% and 6.67%, respectively, and the monthly payment (2492,000 won + 556,000 won = 3048,000 won) has also increased to 36 in two years. % increased.
Moreover, if the base interest rate reaches 3.50% at the end of this year or early next year, the monthly repayment amount of Mr. A in April of next year, six months later, is about 3.4 million won (the principal and interest of 6.07% of the mortgage loan applied per annum + 2765,000 won + credit loan 7.67) % applied interest 639,000 won), which is 51.5% (1157,000 won) higher than the initial loan (2247,000 won).
If the base interest rate rises rapidly, the interest burden not only for households but also for companies including small business owners (self-employed) will increase.
According to a recent analysis by the Korea Chamber of Commerce and Industry, if the BOK raises the base rate by 0.50 percentage points, the loan interest burden on companies will increase by about 3.9 trillion won.
Mathematically, an increase of 0.25 percentage points means that corporate interest will increase by about 2 trillion won.
A more serious problem is that, unlike household loans, which have slowed growth this year, corporate loans have been growing rapidly until recently.
As of the end of September, the balance of corporate loans (including loans to small and medium-sized businesses such as individual businesses) of the five major banks (KB, Shinhan, Hana, Woori, and NH Nonghyup) stood at 69,489.9 billion won, and at the end of last year (635.887 trillion won). KRW), an increase of 9.3% (KRW 59.11 trillion).
This is in contrast to a decrease of 13.99 trillion won in household loans (709,52.9 billion won → 695,833 trillion won) during the same period.
As such, if the interest rate rises while companies have more loans, the number of self-employed or marginalized businesses (companys unable to repay interest with profits for three years in a row) who have difficulty repaying their loans will increase, which may eventually lead to a risk to the soundness of the entire financial sector.
In a report on financial stability on the 22nd of last month, the BOK also said, "If business conditions worsen, such as domestic and overseas economic slowdown, loan interest rate increase, exchange rate and raw material price rise, while the high growth of corporate credit (debt) continues, the interest repayment capacity of the company as a whole will be weakened this year. The proportion of marginal companies will rise significantly from the previous year,” he warned.
(Photo = Yonhap News)