Despite Rate Hike Fears, Newlyweds Choose Variable Mortgages as Fixed Rates Soar

Despite the prospect of rising interest rates, many newlyweds are choosing variable-rate mortgages for their homes. This trend emerges as fixed-rate mortgage interest rates have climbed sharply, surpassing 5% at major commercial banks.

One prospective homeowner, Mr. Go, initially intended to secure a fixed-rate mortgage. However, the recent surge in fixed-rate interest, which now exceeds 5% and is notably higher than variable rates by about 1 percentage point, prompted a reconsideration. "I thought the variable rate would be higher, but it's actually 1% lower than the fixed rate," Go explained. "So, even with the burden of future rate increases, I think I have to choose the variable rate."

The elevated fixed-rate interest mirrors levels seen during the 'Legoland crisis,' a period of financial market turmoil in South Korea. This increase is attributed to the potential for a benchmark rate hike as early as this month, coupled with banks' reduced incentive to offer lower rates due to loan volume regulations.

In response to the growing financial pressure on borrowers, the government is preparing to activate policies aimed at facilitating the transition from variable-rate to fixed-rate mortgages. This initiative seeks to mitigate the impact of anticipated interest rate hikes on households.

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I thought the variable rate would be higher, but it's actually 1% lower than the fixed rate. So, even with the burden of future rate increases, I think I have to choose the variable rate.