Insurance Companies Increase Mortgage Rates Despite Falling Market Rates

Despite a recent reduction in market interest rates due to the Federal Reserve's significant rate cut, major insurance companies in South Korea have increased their mortgage rates over the past month. 

Despite a recent reduction in market interest rates due to the Federal Reserve's significant rate cut, major insurance companies in South Korea have increased their mortgage rates over the past month. This shift has raised concerns about the impact on borrowers, particularly as many are moving from bank loans to non-bank financial institutions.

According to the Life and Non-Life Insurance Association, the mortgage rates for housing loans from twelve major insurance companies have risen this month. Notably, Samsung Life Insurance and Samsung Fire & Marine Insurance now offer the lowest fixed mortgage rates, which are 3.79–5.24% and 3.9–5.74%, respectively. These rates reflect an increase of approximately 0.2 percentage points from last month.

For variable-rate mortgages, Samsung Life's rate increased from 3.93% last month to 4.13% this month, marking a 0.2 percentage point rise. Samsung Fire & Marine saw an even more significant jump, with its rate climbing from 3.75% to 4.19%, a staggering 0.44 percentage points.

The combined market share of Samsung Life and Samsung Fire & Marine in the domestic insurance sector exceeds 60%, meaning that changes in their rates can substantially affect borrowers across the country.

While market interest rates are on a downward trend, the increase in mortgage rates from insurance companies is viewed as a preventive measure against a "balloon effect" caused by borrowers shifting from banks to non-bank financial institutions. This strategy aligns with the government's efforts to manage household debt.

The rise in mortgage rates has also resolved the previous interest rate inversion, where insurance company rates were lower than those of the five major banks (Kookmin, Shinhan, Hana, Woori, and Nonghyup), which now offer fixed mortgage rates starting at 3.6%.

In summary, the recent increase in mortgage rates from insurance companies, despite falling market rates, highlights the ongoing challenges in managing household debt in South Korea. Borrowers may need to reassess their options as the lending landscape continues to evolve. With the government focusing on regulatory measures, it remains crucial for potential homeowners to stay informed about the changing dynamics of the mortgage market.