Rate hike to add $1.21 bil. to mortgage borrowers' interest burden

A quarter-percentage-point increase in mortgage lending rates would add 1.8 trillion won ($1.21 billion) to Korean borrowers' annual interest burden, Bank of Korea (BOK) data showed Wednesday, with the central bank widely expected to raise its benchmark interest rate on Thursday.

The estimate comes a day ahead of the BOK's Monetary Policy Board meeting, where policymakers are expected to raise the benchmark interest rate by 25 basis points to 2.75 percent, in what would mark the first rate increase since January 2023.

According to data submitted by the BOK to Rep.

Lee Jong-wook of the main opposition People Power Party, a quarter-point increase in mortgage lending rates would raise the average annual interest burden per borrower by about 296,000 won, from 5.84 million won to 6.14 million won.

The estimate is based on 1,178.6 trillion won in outstanding housing-related loans as of the end of March, including mortgages and jeonse loans — a rental system in which tenants make a large lump-sum deposit instead of paying monthly rent — extended by banks and other financial institutions.

Th ...