![[Seoul=NEWSIS] Reporter Kim Myeong-nyeon = With the Bank of Korea raising its base rate for two consecutive times, the base rate has entered the 3rd% range for the first time in a year and nine months. Observations suggest that the ceiling for mortgage-backed loan rates could rise to as high as 8% annually. According to financial sector data on the 31st, the five-year fixed-rate mortgage interest rates of the five major commercial banks—KB Kookmin, Shinhan, Hana, Woori, and NH Agricultural Cooperative Bank—had already reached a peak of 7.15% annually as of the 28th. If the Bank of Korea continues its monetary tightening stance, further increases are possible. The photo shows an informational notice regarding mortgage-backed loans posted at a bank in Seoul on this day. August 31, 2026. kmn@newsis.com /Photo=Kim Myeong-nyeon](https://thumb.mt.co.kr/cdn-cgi/image/f=avif/21/2026/08/2026083116245043321_1.jpg)
As expectations for additional rate hikes spread even after the base rate hit 3.0%, anxiety is growing among tenants with full-deposit loans and vulnerable households burdened by debt. Small and medium-sized enterprises (SMEs), which have barely escaped from high exchange rates, are also reporting a sharp increase in interest burdens and operational difficulties. In this context, President Lee Jae-myung’s remarks citing media reports that the base rate is expected to reach 3.5% in the first quarter of next year have sparked significant controversy. While the comments appear aimed at curbing housing price increases and speculative demand, concerns arise that they could become a trigger for financial market turmoil.
As the trend of rising interest rates continues, banks are diagnosing that an era of mortgage-backed loan rates reaching "8% annually" is imminent. The base rate rose consecutively in July and August, pushing the highest fixed-rate mortgage rates well above 7%. For every 0.25 percentage point increase in mortgage rates, the annual interest burden for all borrowers rises by approximately 1.8 trillion won, and the average interest amount per person increases by 300,000 won annually.
With full-deposit rental listings extremely scarce, full-deposit loan rates have also risen into the 6th% range, increasing housing cost burdens for tenants. In Seoul, where the average full-deposit price for apartments has exceeded 700 million won, properties priced at 800 million to 900 million won are becoming more common. Landlords are evicting full-deposit tenants to move in themselves due to pressure on non-resident single-homeowners, and this is compounded by a reduction in available housing units, further driving up full-deposit prices. SMEs (small and medium-sized enterprises), which have relatively poor financial conditions and rely heavily on loans, are voicing difficulties amid high interest rates. More than 70% of corporate loans in Korea are variable-rate types, leaving them fully exposed to the shock of interest rate hikes.
However, President Lee’s remarks the previous day, while stating that "the government cannot intervene in interest rates," also hinted at normalizing interest rates, creating an atmosphere that treats rate hikes as a foregone conclusion. Along with warnings against real estate speculation, he noted that if high interest rates persist for a long time, housing price increases could be curbed, urging caution against additional borrowing. Base rate hikes do not only suppress speculation. Immediately, household consumption capacity will shrink, and companies will face cost pressure. Although the government claims next year’s rate hikes aim to resolve polarization, encouraging the preparation of a "super budget" exceeding 800 trillion won while continuing to inject money is contradictory. Efforts must be made to reduce the misalignment between the Bank of Korea’s interest rate policy and the government’s fiscal policy, and priority should be given to preparing targeted support for those harmed by interest rate hikes.
in OPINION
