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BOK likely to freeze key rate this week amid escalating housing prices: experts

Published: 06 Jul. 2025, 16:03

Apartment buildings in central Seoul are seen from Namsan in Jung District on June 24. [NEWS1]

Korea's central bank is widely expected to keep its policy rate frozen this week to rein in soaring housing prices and household loans, experts said Sunday.

The Bank of Korea (BOK) is set to hold its latest rate-setting meeting on Thursday.

All six experts polled by Yonhap News Agency said the bank's monetary policy board will likely keep the policy rate intact at 2.5 percent, partly highlighting that an additional rate cut may fuel Seoul's already high housing prices and expand household loans.

"As excessive expectations for rate cuts are seen as a factor driving up household debt, the BOK will likely keep its focus on financial stability and freeze the interest rate in line with the government's recent household loan regulations," Park Jung-woo, an analyst at Nomura Securities, said.

Late last month, the Lee Jae Myung administration introduced stricter mortgage rules, capping home-backed loans at 600 million won ($440,000), to cool down the overheated housing prices in the capital region.

The government is widely expected to introduce additional regulations regarding the housing market, as Lee has stressed that his administration seeks to curb speculation in the real estate market.

The experts also pointed to the record-high interest rate gap between Korea and the United States, currently at 2 percentage points, noting the country's foreign exchange market may face increased volatility should the BOK alone lower its rate further.

"The interest rate gap with the Fed is likely the biggest consideration in the BOK's monetary policy right now," said Joo Won, a senior researcher at Hyundai Research Institute, noting there is little reason for the Fed to lower rates aggressively considering the strong U.S. economy.

"The BOK will have no choice but to align its pace with the Fed," he added.

Some of the experts still noted the possibility of the BOK further lowering its key rate up to twice this year to support the economy amid sluggish domestic consumption and U.S. tariff measures.

In May, the Korean central bank lowered its benchmark interest rate by a quarter percentage point to 2.5 percent, continuing its monetary easing cycle that began in October 2024.

"I believe the current economic conditions pose a bigger risk than household debt or the real estate market," Cho Young-moo, head of the NH Finance Research Institute, said, forecasting the BOK to cut rates around October.

Yonhap