Slower increase rate after implementation of Stress DSR Stage 2
Overheating of housing prices still ignites, and there are concerns about stimulus if interest rates are lowered
As the second stage of the stress DSR (Debt Service Ratio) was implemented this month, the growth rate of household loans is gradually slowing down. However, as housing prices continue to rise, especially in Seoul, there are concerns that lowering interest rates could re-stimulate loan demand.
According to the financial sector on the 21st, the household loan balance of the five major commercial banks, including KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup, was tallied at 728.1414 trillion won as of the 19th. This is an increase of 2.7772 trillion won from 725.3642 trillion won at the end of last month.
The balance of housing mortgage loans stood at KRW 571.3166 trillion as of the 19th. Housing mortgage loans increased by KRW 2.655 trillion from KRW 568.6616 trillion at the end of last month.
Last month, the five major banks’ household loans increased by 9.6259 trillion won and their housing loans increased by 8.9115 trillion won, recording the largest monthly increase ever. This is due to the last-minute demand rushing in ahead of the implementation of the second-stage stress DSR. This month, as new loans have decreased due to the strengthening of DSR regulations, the rate of increase is slowing down even when considering the Chuseok holiday.
The balance of credit loans from commercial banks was tallied at KRW 103.7599 trillion as of the 19th. Credit loans increased by KRW 303.7 billion from KRW 103.4562 trillion at the end of last month.
As of the 19th, the balance of jeonse loans was 118.8748 trillion won. The jeonse loans increased by 38.5 billion won from 118.8363 trillion won at the end of last month.
According to the Korea Real Estate Board, apartment prices in Seoul rose 1.27% last month compared to the previous month. This is the largest increase in six years since September 2018 (1.84%).
Seoul apartment prices have been on the rise for 26 consecutive weeks as of the third week of this month (the 16th). However, the weekly increase rate was 0.16% in the third week of this month, down from the previous week (0.23%).
In this situation, the Bank of Korea is becoming increasingly concerned that if it follows the U.S. lead and lowers its benchmark interest rate, it could fan the flames of overheated housing prices and a surge in loans.
Earlier, the Federal Reserve, the central bank of the United States, cut its base interest rate by 0.5% on the 18th (local time). This is the first interest rate cut in 4 years and 6 months since March 2020.
In domestic and international markets, there is speculation that the Bank of Korea may lower the base interest rate by 0.25 percentage points from the current 3.50% after October.
Yoon Ji-ho, a researcher at BNP Paribas, said, “The Bank of Korea’s Monetary Policy Committee meeting on October 11 is likely to be a fierce debate between a hawkish 25bp (1bp = 0.01 percentage point) rate cut and a still cautious rate freeze,” adding, “I predict a 60% chance of a 25bp rate cut and a 40% chance of a rate freeze.”
“We expect the Bank of Korea to prefer a gradual rate cut cycle,” said Yoon. “We expect the policy rate to be lowered to 2.75% by the end of next year and 2.50% by the end of 2026, including a 25bp cut in the fourth quarter of this year.”
A banking official predicted, “Since lowering interest rates could increase loan demand again and cause housing prices to overheat further, the Bank of Korea’s rate cut could start in the first quarter of next year under the current circumstances.”
[서울=뉴시스]
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2024-09-21 21:46:27