Benchmark Rate Hits 3% — How Much More Will You Pay on Your Mortgage?

The Bank of Korea's Monetary Policy Committee just raised the benchmark interest rate to 3.00% per year. You've heard the news about rate hikes — but nobody's telling you exactly how much more you'll owe on your mortgage each month. Let's break it down with real numbers.

Why Does a Higher Benchmark Rate Mean a Higher Mortgage Rate?

Your mortgage rate is built by adding the bank's spread on top of the benchmark rate. When the benchmark rises, the cost for banks to borrow money goes up — and they pass that cost straight to borrowers. Think of the benchmark rate as the wholesale price and your mortgage rate as the retail price. When wholesale goes up, retail follows.

300M · 500M · 700M KRW Loans: 6% vs 8% Side by Side

Using interest-only payments as a baseline, here's what the difference looks like. 300 million KRW loan — At 6%: 1.5M KRW/month / At 8%: 2.0M KRW/month → 500K KRW more every month 500 million KRW loan — At 6%: 2.5M KRW/month / At 8%: 3.33M KRW/month → 830K KRW more every month 700 million KRW loan — At 6%: 3.5M KRW/month / At 8%: 4.67M KRW/month → 1.17M KRW more every month For a 700M KRW borrower, a 2 percentage point rate increase means paying roughly 14 million KRW more per year.

Variable Rate vs. Fixed Rate: Which Should You Choose?

With a variable-rate mortgage, your interest payment moves up or down whenever the benchmark rate changes — in a rising-rate environment like now, that can be a real strain. A fixed-rate mortgage locks in your rate for the agreed term, making monthly payments predictable. The trade-off is that fixed rates often start a little higher than variable. If you believe rates will keep climbing, switching to a fixed rate could be worth exploring. Just watch out for early repayment fees before making a move.