00:03Korea's Central Bank has not touched its policy rate in over a year.
00:07Yet the rate on a new mortgage just climbed half a percentage point.
00:12Today's top story isn't just a banking story.
00:15It's a signal about who pays when regulators squeeze credit.
00:19New mortgage rates hit 4.36% in June and unsecured loans 5.72%,
00:26both up roughly half a point in 13 months.
00:31Large corporations barely felt it.
00:33Their borrowing costs rose just 0.02 points.
00:37And households are moving money out of low-cost bank accounts at the fastest clip in five years.
00:43It's Monday, August 10th.
00:45Let's get into one of Korea's top economic stories today.
00:49The Bank of Korea cut its base rate from 2.75% to 2.5% in May last year
00:56and has held it there through July.
00:58Over the same stretch, financial authorities capped new mortgages at 600 million won,
01:05about $430,000,
01:07and added tighter limits on costlier homes as global yields climbed.
01:12Banks squeezed between rising funding costs and hard lending quotas reach for the one lever left, price.
01:20Here's what the numbers show.
01:22Average rates on new mortgages reached 4.36% in June, up from 3.87% in May last year.
01:31Unsecured consumer loans climbed from 5.21% to 5.72% over the same period,
01:38while small business loan rates added 0.21 points to 4.38%.
01:43Large company rates edged from 4.15% to 4.17%, up just 0.02 points.
01:53The U.S. 10-year Treasury yield touched 4.74% in late July and stood at 4.65%
02:01on August 7th,
02:03while Japan's 10-year climbed into the 2.7% range.
02:07Household loans at the five major banks reached 650.4 trillion won, about $462 billion,
02:16as of August 6th, up 5.4 trillion won, or $3.8 billion this year.
02:23That increase already exceeds the bank's combined full-year growth cap of 4.33 trillion won, roughly $3.1 billion.
02:34Banks responded by blocking online mortgage channels, cutting overdraft limits to 50 million won, around $35,500, and raising rates.
02:45Demand deposits at those same banks fell below 30% of total deposits in July, a five-year low,
02:52as 56.4 trillion won, about $40 billion, drained out in a single month.
02:59So what does this mean for anyone following Korea's economy?
03:03Earlier, we said large corporations barely felt this, while household borrowing costs jumped half a point.
03:10Here's what that actually means for you.
03:13The cost of Korea's credit crackdown is landing on households and small businesses,
03:18because banks are pricing loans to stay under government quotas.
03:22So a frozen policy rate offers borrowers no relief.
03:26With deposits migrating toward time accounts and loan growth capped,
03:31tighter access and higher prices look set to define household finance through the second half.
03:37Three things to watch.
03:38One, the U.S. 10-year yield around the 4.7% line, another leg higher feeds straight into Korean
03:46loan pricing.
03:47Two, July household lending and deposit figures, with the five-bank loan balance already more than 1 trillion won,
03:55about $710 million, past this year's cap.
03:59Three, whether the Bank of Korea, on hold at 2.5% since May last year, addresses the gap between
04:08its policy rate and what borrowers pay.
04:11That's today's AI Prism Front Page Daily.
04:15This episode was produced with AI assistance based on sole economic daily reporting and reviewed by a human editor.
04:23A.I. Prism is a Juan IFRA award-winning series.
04:28We'll be back tomorrow.
04:29There you go.
04:29A.I. Prism.
04:31A.I. Prism.
04:31You're not going to be back tomorrow.
04:32A.I. Prism.
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