Bank Refinancing Loans Show Higher Rates Than Regular New Loans
Park Sunghoon: "Need to Assess the Actual Relief in Interest Burden"
It has been found that, in many cases, refinancing loan interest rates at banks are higher than those of regular new loans. Refinancing is originally designed to allow borrowers to move to another financial institution under more favorable conditions.
According to data submitted by Assemblyman Park Sunghoon, a member of the National Assembly’s Political Affairs Committee, from the Financial Supervisory Service on September 27, out of 16 banks offering mortgage loans as of July this year, 11 banks had average refinancing loan interest rates higher than the average rates for new loans.
The greatest difference was seen at iM Bank, where the refinancing loan interest rate was 7.17% per annum, which is 2.33 percentage points higher than the rate for new mortgage loans (4.84%). Jeonbuk Bank, Jeju Bank, Busan Bank, and Suhyup Bank also recorded refinancing rates that were 0.39–0.53 percentage points higher than new loan rates.
Among the five major banks (KB Kookmin, Shinhan, Hana, Woori, NongHyup), similar “rate inversion” phenomena were observed at Hana Bank, Woori Bank, and NongHyup Bank. At Woori Bank, the refinancing loan interest rate was 4.71% per annum, 0.37 percentage points higher than the rate for new mortgage loans (4.34%). NongHyup and Hana Bank also displayed differences of 0.24 and 0.18 percentage points, respectively.
In the case of unsecured loans, 10 out of 16 banks had refinancing loan interest rates higher than those for new unsecured loans. Gwangju Bank recorded the largest difference at 1.29 percentage points, followed by Toss Bank and Busan Bank with a difference of 1.22 percentage points each.
Among the five major banks, four institutions except for Woori Bank had higher refinancing rates for unsecured loans. Notably, at Hana Bank, the rate for new unsecured loans was 4.70% per annum, while the refinancing rate stood at 5.72%, showing a 1.02 percentage point gap.
However, financial authorities maintain that it is difficult to conclude that refinancing loan rates are simply set higher based on average rate differences alone. This is because there are differences in borrower credit ratings, collateral values, and product composition between new loans and refinancing loans.
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Assemblyman Park Sunghoon stated, “Since the system was designed to help borrowers switch loans to benefit from cheaper interest rates, from a consumer perspective, there are bound to be questions about its effectiveness. Financial authorities need to examine the causes of this rate inversion and assess how much the system is actually reducing borrowers’ interest burdens.”
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