The ‘zero interest rate era’ has just come down… “Can’t rule out a hike in the first quarter of next year”


The era of zero interest rates in Korea has come to an end after 20 months. The Monetary Policy Committee of the Bank of Korea has raised the base rate to 1% per annum. As the possibility of raising interest rates further next year has been hinted at, the interest burden on investors who borrowed debt is growing.

By Jang Hoon-kyung.

As the background of ending the era of ultra-low interest rates in the 0% range, the Bank of Korea heard the domestic economy’s good recovery and steep inflation.

In addition to rising raw material prices such as international oil prices, consumption demand is increasing due to daily recovery, and global supply chain disruptions are prolonged.

He also hinted at the possibility of further rate hikes in the first half of next year.

[이주열/한국은행 총재 : 물가 흐름에 비춰볼 때 (기준금리는) 여전히 완화적인 수준이라고 말씀드릴 수 있습니다. 1/4분기 인상을 저희들은 배제할 필요는 없다고 봅니다.]

The Bank of Korea predicted that households’ annual interest burden would increase by 5.8 trillion won compared to the end of last year due to the two rate hikes.

[김상봉/한성대 경제학과 교수 : 최소한으로 (대출을) 내시는 게 좋을 것 같아요, 본인이 감당할 수 있는 수준만큼. 기존 대출자들도 (일부 원금을) 상환하는 게….]

Real estate purchase sentiment, which has been dampened by loan regulations, is expected to further weaken.

[박원갑/국민은행 부동산 수석전문위원 : 대출 규제에 보유세 부담이 늘어나고 기준금리까지 올라서 수요 자체가 급격하게 둔화될 가능성이 있고요.]

If the US tapering ends next year, interest rate hikes, and the BOK continue to raise rates further, the adjustment phase could be accelerated, and lending regulations will be tightened next year, further tightening real estate demand.

However, interest rates are still below the pre-COVID-19 level, and the outlook is more favorable to wait and wait until June, when the new government’s real estate policy is announced after the next presidential election.

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