Household indebtedness 1500 … More burden on base rate hikes

Entry 2018.11.30 10:50
| Revision 2018.11.30 10:55

The Bank of Korea Monetary Policy Committee raised the benchmark interest rate by 0.25 percentage points, from 1.5% to 1.75% per annum, so that Household debt is expected to increase. Household debt (household credit) exceeding 1.5 trillion won at the end of September this year, commercial bank lending rates will rise in line with the rise in the base rate. In addition, the interest rate on blended loans, which is affected by rising interest rates in the United States, is expected to increase next month.

According to the 30-day financial sector, the MPC raised the benchmark interest rate by holding a regular meeting in the morning. Household credit increased by 95 trillion won (6.7 percent) from the end of last year, reaching 1.514 trillion won at the end of September, exceeding 1.5 trillion won won for the first time in its history. Household credit is an aggregate indicator of household debt, which is the sum of borrowing from financial institutions (household loans) and the use of credit cards (credit for sales) . Household credit growth is twice as high as the growth rate of nominal gross national income (GNI) in the first half of this year (3.3%). Household debt is growing faster than income.

According to the Bank of Korea's announcement of the interest rate on bank loans, the average interest rate on mortgages of major commercial banks processed in November of this year was higher than the one of the previous month. KEB Hana Bank increased by 0.09 percentage point to 3.40% and SC First Bank from 0.08% to 3.36%. Bank KB Kookmin grew by 3.44% and Bank Shinhan by 3.47%, up 0.05 point or 0.03% from the previous month. Woori Bank rose 3.38% to reach a new 0.01% point per month, while Citibank Korea rose 0.04% to 3.41%.

The problem is that lending rates are likely to increase further with the base rate hike. The benchmark interest rate used to calculate the banks 'floating interest rate is COFIX, which is a weighted average of the banks' interest rates, which reflects the purchase costs. "A bank official said recently:" With the recent rise in the interest rate on bank deposits, the interest rate on the new borrowing rate has recently reached its highest level. The interest rate on variable rate borrowings will increase for the time being due to the rise in the benchmark interest rate. "I said.

In the case of the market interest rate (MOR), which serves as a basis for calculating the interest rate on loans, the interest rate on certificates of deposit (CDs) issued for three months and AAA interest rate on financial obligations from six months to five years C 'is decided. Bond yields are determined by the market and depend more on the US base rate than the base rate. Given that the interest rate hike in the United States is expected next month, the compound interest rate is expected to rise for now.

According to the report on financial stability presented to the National Assembly by the Bank of Korea in June, if the interest rate on loans increased by 1 point, the share of households at high risk would increase by 0.4 point, from 3.1% to 3.5%. The percentage of high-risk households will rise to 4.2% if they increase by 2 percentage points. High-risk households refer to households with a DSR above 40% and total debt over 100%.

A market banker said: "We are concerned that the United States will maintain the rate hike for now," he said.