While commercial banks are lowering household loan rates in line with the central bank's interest rate cuts, the collective loan interest rates for apartments in Seoul remain at last year's second-half levels. This is due to concerns that lowering collective loan rates could lead to a surge in household loan balances. Banks have been managing household loans on a quarterly, monthly, and weekly basis since this year.
According to the financial sector on the 17th, for the Jangwi-dong Xi Radiant in Seoul, where occupancy begins this month, KB Kookmin Bank and Woori Bank have set the additional charge for balance loans at 1.3 percentage points. The balance loan interest rate is determined by adding the additional charge to the '5-year financial bonds benchmark rate.' The balance loan interest rate for this apartment is about 4.25% per year.
The Industrial Bank of Korea set the additional charge at 1.2 percentage points, which is 0.1 percentage points lower than other banks. However, the loan limit is a maximum of 70% of the appraised value, which is 10% lower than other banks (80%).
Occupancy for 'Lotte Castle East Pole (1,063 households)' in Jayang-dong, Seoul, also begins this month, and KB Kookmin Bank, Hana Bank, Woori Bank, and NongHyup have all set the additional charge at 1.3 percentage points. The apartment's balance loan interest rate is expected to be at a similar level as the Xi Radiant. Shinhan Bank adopted an additional charge of 1.2 percentage points, but instead, there are conditions for preferential interest rates, such as issuing credit cards, check cards, or automatic transfers.
The collective loan additional charge of 1.3 percentage points is similar to or even higher than last year's fourth-quarter levels. The additional charge for the Dunchon Jugong (Olympic Park Foreon), which faced worries of a chaos due to insufficient balance loan limits last year, was initially 1.5 percentage points but was later reduced to 1.3 percentage points. The mid-term loan for the Seocho The H in Daebang, which was sold in August last year, was set at an additional charge of 1.00%.
Recently, the lower end of the average interest rate for mortgage loans from some commercial banks has fallen to the high 3% range per year. Generally, for collective loans for apartments in Seoul, it is customary to set lower interest rates due to the low risk of default. However, the gap between collective loan rates and general mortgage loan rates has widened by up to 1 percentage point.
Analysis from the financial sector suggests that commercial banks will find it difficult to further lower collective loan rates. Despite pressure from financial authorities to lower rates, they have also been instructed to manage total amounts, making it difficult for banks to increase collective loans. The recent surge in mortgage loans from the banking sector has largely been influenced by the commencement of occupancy in large complexes in Seoul, such as Olympic Park Foreon and Imun-dong Raemian La Grande.
A commercial bank official noted, 'As consumers respond sensitively to loan interest rates, if only specific banks lower collective loan rates, it could lead to a concentration of loans with those banks, causing issues with household loan total amount management.' They added, 'The current downward trend in rates seems to be gradually reflected in collective loans.'