Mortgage rates rise to highest in over 9 years amid BOK's monetary tightening

A person passes by a banner giving information on loans at a bank in Seoul, May 25. Yonahp

Korean banks' mortgage rates rose to their highest level in more than nine years in April as borrowing costs are on the rise amid the central bank's push for monetary tightening to bring inflation down, central bank data showed Tuesday.

Rates on mortgages extended by local banks stood at an annual 3.9 percent on average in April, up 0.06 percentage points from a month earlier, according to the data from the Bank of Korea (BOK).

They were the highest since the rates rose to 3.97 percent in March 2013.

Rates on unsecured household loans also rose 0.16 percentage points month-on-month to a 5.62 percent average in April, which was the highest since June 2014.

The rises came as the BOK has increased its policy rate at a fast pace in recent months to keep rising inflationary pressure in check.

Last week, the BOK hiked its key interest rate by a quarter percentage point to 1.75 percent. The rate increase was the fifth of its kind since August last year.

BOK Gov. Rhee Chang-yong has hinted at further hikes, saying that the central bank will place top priority on price stability for the time being in the face of mounting inflationary pressure.

Rising borrowing costs have added to the financial burden on many indebted households who have taken out loans to buy homes and tide over the pandemic. (Yonhap)