South Korean borrowers face rising interest burdens despite rate shifts

South Korean borrowers are increasingly turning to fixed-rate mortgage loans as rising interest rates increase the burden of variable-rate debt. While the proportion of fixed-rate loans in new mortgage markets has risen, existing borrowers face significant hurdles when attempting to refinance. Many banks are charging higher average rates for refinancing loans compared to new loans, and additional costs such as early repayment penalties can limit actual savings.

Furthermore, despite legislative changes intended to prevent banks from passing legal costs onto customers through spread rates, the actual interest burden remains high. Major banks have been reducing preferential discount rates more significantly than they have lowered spread rates, effectively neutralizing the intended relief for consumers. Banks argue that maintaining higher rates is necessary to manage loan demand and prevent hitting household debt limits. With global bond yields rising, interest rate pressures on both fixed and variable loans are expected to continue.