Mortgage debt per borrower in their 30s has grown by more than 100 million won ($72,000) over the past seven years, central bank data showed. Through a housing market correction and a sharp rise in interest rates, mortgage balances per borrower for those in their 20s through 40s did not decline in a single quarter.
Mortgage debt per borrower in their 30s stood at 234.19 million won in the second quarter of this year, up 101.96 million won, or 77.1%, from 132.23 million won in the second quarter of 2019, according to the Bank of Korea on the 9th. For borrowers in their 20s and younger, the figure jumped 74.3% over the same period, to 203.94 million won from 117 million won. That pace is more than double the 36.8% average increase for all borrowers.
Mortgage balances per borrower among those in their 20s through 40s rose for 28 straight quarters from the second quarter of 2019 through the second quarter of this year. The balances did not fall in a single quarter, not only during the housing price surge but also after 2022, when the policy rate climbed rapidly and the housing market corrected.
Borrowers Stretched to the Limit Face 660,000 Won More a Month
Rate shocks have compounded the accumulated debt. Borrowers who took out mortgages at fixed rates of 2.5% to 2.8% in the first half of 2021 are being shifted to floating rates starting this year. New floating-rate mortgages now carry rates of 4.2% to 4.4%, about 1.7 percentage points higher than five years ago.
For a borrower who took out 300 million won in 2021 at 3% on a 30-year loan with equal monthly payments of principal and interest, the monthly payment is about 1.265 million won. If the rate is reset to 6% after five years on a remaining principal of about 267 million won, the monthly payment rises to about 1.72 million won. At 7% it climbs to about 1.885 million won, and at 8% to about 2.06 million won. Under an 8% rate, the monthly burden would increase by about 794,000 won, or roughly 9.5 million won a year.
Market rates are also rising. Yields on six-month bank debentures topped 3.5% this month, and the cost of funds index rose to 3.0%. Expectations of further rate increases by the Bank of Korea could add to repayment burdens.
The result is an entrenched structure in which people in their 20s and 30s, who leaned more heavily on loans as home prices climbed, absorb the full impact of rising rates. Analysts say that, separate from tightening the bar for new lending, measures are needed to ease the weight of debt already accumulated.
