By Yoon Ja-young
Staff Reporter
Annual interest rates on mortgages are soaring, adding to the household economy burden. Pressured by payments, some homeowners are choosing to put their homes up for sale. However, it is hard to find a buyer amid a real estate market slump.
The rate hike is notable for fixed rate mortgages. Shinhan Bank set a fixed rate on mortgages this week at between 7.88 and 9.48 percent, a 0.22 percentage point hike from a week ago. The maximum rate, which could soon break 9.5 percent, has been rising from three months ago when it recorded 7.89 percent.
Kookmin Bank and Hana Bank also raised the interest on fixed rate mortgages by over 0.1 percentage point, with the maximum interest rate set at 9.24 percent. Woori Bank raised the rate by 0.02 percentage points to between 8.02 and 9.12 percent.
Most homeowners get loans not on these fixed rates but on floating rates. It doesn't mean, however, that they will be okay. The CD rate, the basis for floating rate mortgages, rose for six consecutive days last week, recording 5.79 percent last Thursday. It rose to its highest level since January due to the tight money policy following the oil price hike and inflationary pressure. Following the hike, banks raised interest rates on floating rate loans.
Shinhan raised the rate by 0.04 percentage points to between 6.58 and 8.18 percent. Other banks also pushed up the interest rate, with the minimum rate hovering over 6.5 percent and the maximum rate set at around 8 percent.
The problem is getting serious as many homeowners start paying principle of the loan along with the interest this year after paying back only interest for the first three years. The recent interest rate hike means they have to pay more each month. According to Rep. Park Sang-don of the Liberty Forward Party, some 37.7 trillion won in such loans are due for principle payment next year, and 18.2 trillion won this year.
The interest rate isn't likely to reverse the rising trend in the near future. That's why experts advise homeowners to put first priority on paying back the loans.
Some are putting their homes on sale, but the housing market slump, coupled with heavy restriction on loans, has reduced the number of buyers on the market. The poor demand is pulling down apartment prices further in some areas. Expensive apartments in southern Seoul and Yongin and Bundang in Gyeonggi Province have shed hundreds of millions won in value during the last few months.