Lee Hyo-jin covers the Bank of Korea, the banking industry and broader financial news. Her previous beats include foreign affairs, North Korea and general reporting on Korean society.
Expected BOK rate hike prompts concern over rising interest burdens on households, firms
An advertisement for mortgage loans is seen at a commercial bank in Seoul, May 31. Yonhap
By Lee Hyo-jin
Top mortgage rates climb to 7.3%, highest since October 2022
Expectations of imminent interest rate hikes by the Bank of Korea (BOK) are adding to pressure on households and businesses already struggling with rising borrowing costs, analysts said Sunday.
Lending rates at major banks have continued to climb as BOK Gov. Shin Hyun-song struck a hawkish tone following a Monetary Policy Board meeting on May 28, reinforcing market expectations that the central bank could begin raising rates as early as July.
According to banking industry data, fixed-rate mortgage loans offered by the country's five major lenders — KB Kookmin, Shinhan, Hana, Woori and NH NongHyup — carried interest rates ranging from 4.39 percent to 7.33 percent as of Friday.
The upper end of the range was up 0.33 percentage point from a month earlier, when rates stood between 4.4 percent and 7 percent.
It marked the first time since October 2022 that the highest fixed mortgage rate among the five major lenders exceeded 7.3 percent.
Personal credit loan rates have also moved higher.
As of Friday, interest rates on personal credit loans for top-tier borrowers with one-year maturities ranged from 4.31 percent to 5.93 percent, with the upper end nearing the 6 percent mark.
The rise in market interest rates comes as investors increasingly expect the central bank to begin raising its benchmark rate in the latter half of the year amid rising geopolitical tensions in the Middle East and growing inflationary pressures.
Though the BOK's Monetary Policy Board kept its benchmark rate unchanged at 2.5 percent at its May meeting, markets took Shin's remarks as a signal that a rate hike could come as early as July.
"The policy direction is relatively clear when looking at inflation, growth, the exchange rate and the housing market. Raising the benchmark rate going forward could provide an opportunity to manage these factors in a more consistent manner," Shin said during a press conference after the meeting.
Bank of Korea (BOK) Gov. Shin Hyun-song speaks during the 2026 BOK International Conference in Seoul, June 1. Yonhap
Analysts warn that borrowing costs could rise further if the BOK enters a rate hike cycle, placing additional strain on financially vulnerable households already burdened by debt.
"A higher policy rate will be transmitted quickly to commercial bank lending rates, putting significant pressure on heavily indebted borrowers. Financially vulnerable borrowers are likely to be hit hardest if rates continue to rise," said Kim Dae-jong, a professor of business administration at Sejong University.
Small and medium-sized enterprises are also expected to face mounting pressure if the BOK begins raising interest rates, Kim said, as higher borrowing costs could weigh on firms that rely heavily on loans for funding.
Analysts also voiced concerns about the growing use of borrowed money in the stock market, warning that higher interest rates could increase repayment burdens for retail investors who have taken on debt to chase recent gains.
The benchmark KOSPI has gained nearly 90 percent so far this year on the back of a semiconductor supercycle, fueling a sharp increase in margin borrowing among retail investors. According to the Korea Financial Investment Association, outstanding margin loans used for stock purchases surpassed 38 trillion won ($24.3 billion) for the first time as of May 29.
With margin debt at record levels, heightened market volatility could leave heavily leveraged investors increasingly vulnerable, experts said.