The Bank of Korea Monetary Policy Committee (MPC) raised the base rate by 0.25 percentage point (p) again today (24th), and for about a year and three months since August last year, the base rate has been 2.75% from 0.5% to 3.25% per annum. I ran a point.

Accordingly, it is estimated that even if the loan interest rate rises by the amount of the base rate hike, the interest burden on household borrowers will increase by more than KRW 36 trillion.

Moreover, as expected, if the base rate rises by 0.25 to 0.50 percentage points by the first half of next year, the vulnerable, such as multiple debtors, those in their 20s and 30s, and the self-employed, and 'Youngkul', who have aggressively bought assets using leverage (borrowed investment) in the past two years ( The burden of repayment of principal and interest is expected to increase for those who attract even the soul) and 'debt-to-debt' (invest with debt) groups.

When the base rate rises, the cost of financing, such as the bank's deposit rate, increases, and eventually, the interest rate applied by the bank to the loan inevitably rises.

According to the Bank of Korea, assuming that the base rate rises by 0.25 percentage point and the loan interest rate rises the same, the interest rate of all borrowers will increase by about 3.3 trillion won.

This is the result calculated by applying the estimated proportion of floating rate loans from banks and non-bank financial institutions (74.2% on average) to the balance of household loans as of the end of the second quarter of this year.

In August of last year, the Monetary Policy Committee raised the base rate by 0.25 percentage point for the first time in 15 months, which had been lowered to the lowest level in history (0.50%). As much as the point (0.25% point × 11) increase, only the increased interest for 1 year and 3 months is estimated at 36.3 trillion won (3.3 trillion won × 11).

In addition, the BOK analyzed that a 0.25% point increase in the base interest rate would increase the annual interest burden per household borrower by an average of about 164,000 won.

Since August of last year, 2.75 percentage points, which is 11 times higher than 0.25 percentage points, has jumped, so the annual interest per borrower has also increased by 1.84 million won.

In a financial stability report last September, the Bank of Korea said, "We need to pay attention to the possibility of realizing potential risks due to rising interest rates." The risk of insolvency will increase, especially in vulnerable sectors such as excessive borrowers and marginal companies."

As of the 18th, the variable interest rates of the four major commercial banks (KB Kookmin, Shinhan, Hana, and Woori) for housing mortgage loans (linked to the new handling amount Cofix) ranged from 5.280 to 7.805% per year.

This is because the COFIX (funding cost index), a benchmark interest rate, jumped to 3.98%, the highest since the announcement in January 2010, based on the new handling amount in October.

As interest rates on deposits and savings accounts soared due to the rise in the base rate, and market interest rates on bank debentures also rose, banks' funding costs increased.

Credit loan interest rates (grade 1, 1 year, 6.218-7.770% per year) are also close to the 8% range, and mixed-type (fixed) interest rates on housing mortgage loans (5.200-7.117% per year) and jeonse loans (Housing Finance Corporation Guarantee, The two-year maturity) interest rate (5.230-7.570%) also exceeded 7%.

Moreover, loan interest rates are likely to rise further by the first half of next year.

First of all, even if today's standard interest rate rises even higher (0.25 percentage point), the upper end of the loan rate, which is currently in the upper 7% range, is expected to enter the 8% range within the year for the first time in about 14 years since the financial crisis.

As expected by the market, if the Bank of Korea further raises the benchmark interest rate to a maximum of 3.75% early next year, the era of the '9% interest rate' may become a reality.

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If interest rates rise rapidly like this, it is expected that not a few borrowers who bought assets forcibly based on ultra-low interest rates two years ago will see their annual repayments soar by nearly 60% at the end of this year or early next year.

According to a case study of a borrower from one of the five major commercial banks, Mr. A, an employee of a large company (grade 3 in credit rating), borrowed more than 500 million won from a bank two years ago (November 2020) and rented a 33-pyong (exclusive) apartment in Woosung, Mok-dong, Yangcheon-gu, Seoul. 84.63㎡) was purchased (KRW 1.25 billion).

Mr. A’s total loan amount is KRW 430 million in housing mortgage loan (repayment of principal and interest in equal installments over 30 years. New handling amount Cofix 6-month linked interest rate) and credit loan of KRW 100 million (loan period of 1 year. The deadline can be extended every year. Financial debentures 6 monthly interest rate) is 530 million won.

The interest rate applied to Mr. A for the first six months is 2.98% per annum for mortgage loans and 3.61% for credit loans, and the monthly principal and interest payments are approximately 2,109,000 won (1,809,000 won in principal and interest on mortgage loans + 300,000 won in credit loan interest). was

However, as of this month, two years later, interest rates on mortgage and credit loans jumped to 5.50% and 7.48%, respectively.

As a result, the monthly payment (2,409,000 won + 623,000 won = 3,032,000 won) also increased by 44% in two years.

Moreover, if the standard interest rate reaches 4.00% in the first half of next year, Mr. A’s monthly payment in May of next year, six months later, will be about 3,372,000 won (2,665,000 won principal and interest applied at 6.50% per annum for home mortgage loan + 8.48% applied interest for credit loan) 707,000 won), which is 59.9% (1.263 million won) higher than at the time of the initial loan (2.109 million won).

If the base interest rate rises at a rapid pace, not only households but also companies, including small business owners (the self-employed), will have a greater interest burden.

According to a recent analysis by the Korea Chamber of Commerce and Industry, even a 0.25 percentage point increase in the base interest rate would increase the interest burden on loans by about 2 trillion won.

A more serious problem is that, in contrast to the slowdown in household loan growth this year, corporate loans have been growing rapidly until recently.

This is because financing through corporate bond issuance has become difficult due to the bond market crunch.

As of the end of October, the balance of corporate loans (including loans to SMEs such as individual business owners) of the five major banks (KB, Shinhan, Hana, Woori, NH Nonghyup) stood at KRW 704.6707 trillion, up from the end of last year (635.8879 trillion KRW). KRW 68,782.8 billion, an increase of 10.82% from KRW).

In contrast, household loans (709.529 trillion won → 693.6475 trillion won) decreased by 15.454 trillion won during the same period.

In this way, when interest rates rise while companies have taken out a lot of loans, the number of self-employed or marginal companies (companies that cannot even pay interest with profits for three consecutive years) having difficulty repaying loans increases, which may eventually spread to the soundness of the entire financial sector.

In the Bank of Korea’s “Financial Stability Report,” corporate credit (debt) is rapidly increasing this year, and business conditions have deteriorated, such as domestic and international economic slowdowns, rising lending rates, and rising exchange rates and raw material prices. ) and the proportion of borrowings (compared to all companies subject to external audit, excluding the financial and insurance industries) is expected to increase from 14.9% and 14.8% last year to 18.6% and 19.5% this year.

(Photo = Yonhap News)