Rising interest on home equity loans increases homebuyers’ financial burden
- Date 2010-03-23
- Views 1,492
- K-HAI rises for three consecutive quarters
since Q2 of 2009 -
The rise in K-HAI was led by rising interest
rates on loans (from 5.77% to 5.90% on average) and the hike in home prices
(from 185 million won to 185.50 million won), despite the fact that household
income remained virtually unchanged in Q4 (0.1% increase over the previous
quarter). The cause for rising rates on home equity loans is the continued rise
in the base CD rate from 2.41% in June 2009 to 2.64% in September 2009, and
again to 2.82% in December 2009.
The index has risen not only in every region,
but for homes throughout the nation, no matter what the size. Most notably, the
rise in home prices in Busan, Daejeon, Seoul, Incheon, and Daegu led to a K-HAI
increase of 2 points or more over the previous quarter in these regions. On the
other hand, the change in home prices in Gyeongsangbuk-do, Jeju-do, Gangwon-do,
Jeollabuk-do, and Gyeonggi-do regions was relatively low, resulting in a
smaller increase in the index.
The K-HAIs for the Seoul metropolitan regions
including Seoul (164.5), Gyeonggi (101.0) and Incheon (92.5) surpassed the
national average by a large margin (77.1), indicating that the cost of home
ownership by urban workers in the Seoul metropolitan area is significantly
high. Despite the rise over previous quarters, the K-HAIs for regions outside
the Seoul metropolitan area were way below the baseline of 100, showing that
the cost of home-buying is low in these regions.
What
is K-HAI?
The Korea Housing Affordability Index,
or K-HAI, was developed by Housing Finance in 2008 by adapting the concepts of
Canada’s Housing Affordability Index to the Korean market. The index
establishes a base value of 100 when a median-income family has sufficient
income to purchase a median-priced home. A higher index number indicates that
the family would take on a higher financial burden when buying a home.
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