"Increase on Household Loan Rate "

A household loan rate of commercial banks will be raised all lines from this week.

It is based on a strong restraint policy of household loan. Accordingly, it is forecasted that a new household loan will largely be contracted for a while and the interest rate burden will increase when a maturity of existing loans expands.

According to a financial circle on November 17, most of commercial banks have already decided to increase the household loan rate or reviewed the interest increase.

Cho Hung Bank plans to increase a current fixed interest of 7.2% per annum by 1% point from next month for a home mortgage loan.

Kookmin Bank will determine the increasing rate at the beginning of the week by making an additional rate when a debt rate (total debt ÷annual income) is more than 250% or a submission of documentary evidence of income is rejected. The increase will be less than 0.1% point per annum.

Woori Bank has been reviewing the policy to increase 0.6∼0.7% point over the existing loan rate for debtors who have over 30 days for default days of home mortgage loan and have over 250% for the debt rate.

Such as Hana Bank and Shinhan Bank, other banks will plan to make the additional interest to customers who have over 250% of debt rate.

KorAm Bank decided to abolish a bonus system which lows the interest rate when customers apply for a credit card while receiving the loan. So, the interest rate will increase by 0.2∼0.3% point per annum this year.

Banks has increase the interest rate directly through setting expense of fixed collateral corresponding to 0.6∼1% of total loan amount. If banks receive the setting expense of fixed collateral which was exempted by being in a competition of the home mortgage loan , the loan rate will seem to be raised by 0.2∼0.3% per annum.

On November 6, Woori Bank has resurrected the setting expense of the fixed collateral and Shin Han Bank decided to receive it from the 18th day of the month. Cho Hung Bank has also received the setting expense of fixed collateral for a small loan with less KRW 30 million won from November 18. Korea Exchange Bank plans to resurrect such expense during this week.

An official of the commercial bank said, “As the risk weights was adjusted upward to 60∼70% from 50%, the BIS rate decreases by 0.17∼0.34% point. Accordingly, the increase of the loan rate is unavoidable.”

If the customer has the loan of 50 million won with 3 years maturity period from the bank which applies for the home mortgage loan rate of 6.4% per annum, the customer had the monthly interest rate of 266,660 won up to now, but has to pay the more interest of 41,660 won per month by the increase of 1% point.

Chi-Young Shin higgledy@donga.com