Dangerous collaboration

Bank loan rates are rising sharply. The mortgage-backed loan rate has exceeded 5 percent. The surge in interest burden can harden the lives of borrowers. A petition for a curb in lending rates was filed on the Blue House website. Many will sympathize with the petitioner’s reasoning against the “exploitation by banks under the pretext of containing household debt.”

“Various regulations are in place to check the rise in household debt,” wrote the petitioner. After the Financial Services Commission has set a regulatory guideline, each lender has come up with actions.” He added, “Household debt risk should be contained. Since interest rates are rising, redemption could become difficult, sending many to borrow more. When interest rates go up, the bubbles may pop,” the writer complained. The petitioner was well aware of the necessity due to the imperative tightening environment from inflationary buildup. In Korea, household debt has reached a whopping 1,800 trillion won ($1.5 trillion).

Still, interventionist state financing and bank exploitation have gone too far. The petitioner claimed that banks and other lenders are “weaponizing” the loan scarcity under state-set quota and “profiteering” through the elimination of favorable rates for qualified borrowers. In the eyes of a consumer, the spike in interest rates is a joint work of state intervention and greedy banks.

The fixed rate of mortgage-backed loans offered by four major banks hovers at 3.96 percent to 5.26 percent, compared with the 2.69 percent to 4.20 percent in December last year. When the Bank of Korea raises the base rate by another 25 basis points this month as expected, the maximum loan rate could go beyond 6 percent. Interest rates are surging even before the central banks of the U.S. and Korea raised their benchmark rates after the government pressured banks to tighten household debt to control housing prices. Banks complied by shaving favorable rates and increasing premiums on lending.

Bank rates have increased higher than some institutions in the second-tier financial market. Yet banks remain stingy with deposit rates. Thanks to easy gains from the gap in loan and saving rates, the four financial holding groups raked in net profit of nearly 4 trillion won in the third quarter. They are even offering 500 million to 1 billion won per employee in early retirement package. They live in another world from the common people who cannot afford a home. The Blue House must answer their outcry.