interest rate

 Banks' household debt reached 1040.2 trillion won, hitting an all-time high again. With the Bank of Korea expected to raise its key interest rate at the Monetary Policy Committee scheduled for the 26th, those in their 30s are expected to be hit hardest by the rate hike. Bank of Korea Governor Lee Ju-yeol also made clear his position in June to raise the benchmark interest rate within the year. Ko Seung-beom, a member of the Monetary Policy Committee who recently moved to the Financial Services Commission, which determines the key interest rate, is also interpreted as a clearer indication of the possibility of a rate hike. "We will thoroughly manage economic and financial risk factors such as household debt and asset price fluctuations to prepare for internal and external uncertainties," he said.

The problem is the loan status of people in their 30s. Currently, Korea's top 30 loans have the highest ratio, reaching 2.7 times its annual income. The increase in the burden on people in their 30s if interest rates are raised is higher than any other age group. The LTI here refers to the ratio of household loans to annual income, with those in their 30s showing the highest ratio of 266.9%, and an increase of 6.1% compared to the same period last year. The most severe interest burden on young people who borrowed money from so-called "spiritual" (crowded to the soul) and "debt" (investment by pulling debt) due to soaring apartment prices is that prompt measures are required for young people before raising interest rates. Cho Young-moo, a researcher at the LG Economic Research Institute, predicted that if the pace of monetary tightening in the U.S. overlaps, the impact on the rate hike could be greater.

The general analysis is that the current situation is due to the recent real estate policy and the low interest rate trend. Mortgage loans, which had slowed down, also rose sharply, and jeonse loans expanded. Mortgage loans, including jeonse funds, rose by 6.1 trillion won last month. This is an increase of 1 trillion won from the previous month. Jeonse loans increased by 2.8 trillion won, while other loans increased by nearly 3 trillion won from the previous month to 3.6 trillion won. The Bank of Korea also said, "We understand that some of the subscription evidence is not being repaid due to other purposes such as subscription for public offering shares or stock investment in the future."

The problem is not just household loans. Private business loans also showed an unprecedented increase. Bank corporate loans totaled 11.3 trillion won in July. It is the largest increase as of July since the preparation of related statistical breaking news. The size of SME loans, including loans from individual businesses, is also the largest increase as of the same month. It seems to be in the aftermath of financial support from banks and policy financial institutions and demand for funds related to the payment of VAT.

However, experts say that it is difficult to put a brake on the pace of debt growth only by regulations by financial authorities to manage household debt. Ha Joon-kyung, an economics professor at Hanyang University, said, "As the economic recovery and the supply of vaccines are accelerating in the ultra-low interest rate situation, speculative funds are flocking to the asset market," adding, "The market is not afraid of the authorities' tweezers." Kim Sang-bong, an economics professor at Hansung University, also pointed out, "The current debt growth has passed the stage that can be controlled only by financial policies," adding that comprehensive government measures centered on real estate supply are urgently needed.