Even after the Bank of Korea lowered the benchmark interest rate by 0.25 percentage point in August for the first time in 15 months, one out of three commercial banks has raised their home mortgage loan rates by adding a spread. To this the banks explained that this was inevitable as the state-run Housing Finance Corp. hiked up the rate. Still, there are complaints that this is shifting of the burden of declining profitability to banking consumers.
According to the Korea Federation of Banks on October 20, the average annual interest rate for September home mortgage loans (based on 10-year loans) was 3.63 percent for Nonghyup Bank, up 0.13 percentage point from August. As for Industrial Bank of Korea, it was up 0.09 percentage point to 3.50 percent. Woori Bank also raised its rate by 0.07 percentage point to 3.51 percent.
Just as the banks said, this was largely due to Housing Finance Corp. jacking up its spread by 0.43 percentage point in August to 3.72 percent. A Housing Finance Corp. official said, "In June this year, we set the spread rate low at 3.3 percent but we had to adjust the rate in August as the treasury bond rates have increased." Of the 17 commercial banks, 13 saw their Housing Financial Corp.-determined spread rate rise.
Meanwhile, a banking industry official commented, "There are some banks that have not raised their home mortgage loan rates by offsetting the rise in the spread rate through lowering their internal benchmark rates. Given the trend toward mounting household debt, it is not right for banks to seek profitability without thinking about the soundness of the whole economy."
By Kim Min-ji(mjkim@koreaittimes.com)
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