COVID-Era Mortgages Reset, Raising Monthly Payments by 660,000 Won

Three-Point Briefing

• The end of five-year fixed-rate periods on ultra-low-rate COVID-era mortgages is a cash-flow shock that raises borrowers’ monthly payments, reducing both consumer spending and homebuying capacity.
• According to calculations reported by the Kyunghyang Shinmun on September 6, when the rate on a 500 million won loan resets from 2.5% to 5.0% annually, the monthly principal-and-interest payment rises by 660,000 won, from 1.97 million to 2.63 million won.
• Higher lending rates benefit banks’ interest income, but the effect cannot be viewed as a straightforward rate-driven gain if mortgage lending declines and delinquency risk increases.

Seo Eun-chae’s assessment is clear. This shock should be tracked first in household bank accounts, not home prices. When monthly payments jump, genuine homebuyers postpone new purchases and existing borrowers cut spending. Trading volume and domestic-demand earnings are likely to respond in sequence.

What Is Changing?

Hybrid mortgages carry a fixed rate for a set period before switching to a floating rate comprising the COFIX or bank-bond rate plus a spread. Loans originated at annual rates of 2.57–2.83% in the first half of 2021 began reflecting market rates again in the first half of 2026. In effect, borrowers secured those low rates for only five years, not the full 30-year term.

The financial burden is substantial. In the case reported by the Kyunghyang Shinmun, a borrower who took out a 350 million won loan in 2021 saw the monthly principal-and-interest payment rise by 270,000 won, from 1.40 million won to 1.67 million won, in April 2026. With monthly housing costs increasing by about 19%, discretionary spending on dining out, retail goods, and travel is likely to come under pressure first.

The impact on the housing market is transmitted through transactions before prices. Existing borrowers postpone moving or purchasing additional homes because of higher principal-and-interest payments, while new borrowers qualify for smaller loans on the same income. As more mortgages become subject to rate resets, actual trading volume may slow before asking prices decline.

The Numbers in Context

According to the Kyunghyang Shinmun, citing the Bank of Korea’s Economic Statistics System, fixed-rate mortgages accounted for 69.1% of mortgages in 2020 and 55.5% in 2021. Applied rates were 2.4–2.5% annually in 2020, while the average rate on new floating-rate mortgages was 4.2–4.4% annually in the first half of 2026. This explains why the issue is emerging sequentially across a broad group of borrowers rather than being confined to isolated cases.

The rate trajectory also remains challenging. The six-month bank-bond yield rose from around 2.7% in January 2026 to above 3.0% in May and surpassed 3.5% in September. Balance-based COFIX also climbed to 3.0% in August. Conversely, if market rates decline, borrowers’ burdens could ease from their next reset date, so it would be wrong to conclude that every borrower’s rate will immediately rise to 5% annually.

Stocks That Stand to Gain or Lose

• KB Financial Group·Shinhan Financial Group·Hana Financial Group: Higher lending rates support asset yields. The key question is whether a decline in new mortgage lending and higher credit-quality costs offset the earnings benefit.
• Woori Financial Group: It has the same potential upside from the repricing of household loans, but if heavier repayment burdens translate into higher delinquency rates, provisions will rise as well.
• Hyundai Engineering & Construction: Weaker financing capacity among genuine homebuyers could weigh on presale momentum and the viability of new housing projects. If high rates persist, it will also take longer to clear unsold homes.
• Emart: Higher monthly housing costs reduce households’ discretionary spending. Revenue from nonfood and high-priced products may be affected before food sales.

Risk Checklist

• The lowest advertised lending rates assume that borrowers meet every preferential condition. Check the contract separately for the actual applied rate and repricing interval.
• The five largest banks’ household-loan balance stood at 781.3916 trillion won on September 3, down 727.6 billion won from the end of August, while mortgages declined by 757.9 billion won. The drag from lower lending volume could outweigh banks’ benefit from higher rates.
• Refinancing decisions should not be based on headline rates alone. Borrowers must also account for early-repayment fees, the remaining maturity, and changes in borrowing limits under the debt-service ratio, or DSR.
• If repayment pressure leads first to a transaction freeze and then to an increase in distressed sales, falling collateral values and deteriorating bank asset quality could emerge simultaneously.

Bottom Line

The repricing of ultra-low-rate mortgages is a short-term positive catalyst for bank interest income, but if higher monthly payments spill over into consumption, trading volume, and delinquency rates, the burden on housing and domestic demand will last longer.

Frequently Asked Questions

How much can mortgage rates rise after the five-year fixed period ends?

In a case reported by the Kyunghyang Shinmun in September 2026, the monthly principal-and-interest payment on a 500 million won, 30-year loan at 2.5% annually rises from 1.97 million won to 2.63 million won when the rate resets to 5.0% annually. The actual amount depends on the remaining principal, maturity, and benchmark interest rate used for repricing.

When does a COFIX increase affect mortgage rates?

COFIX-linked floating-rate mortgages are repriced at the six-month or one-year interval specified in the contract. The rate does not change immediately when COFIX rises, so borrowers should first check their next rate-reset date.

Are rising mortgage rates a positive catalyst for bank stocks?

Higher lending rates themselves increase banks’ asset yields. However, if mortgage balances decline or delinquency rates and provisions rise, the improvement in earnings will be reduced, so investors should monitor both net interest margins and household-loan growth.

This article was automatically summarized and analyzed based on the original news report. View the original article (Kyunghyang Shinmun)