Fixed-Rate Mortgages Gain Popularity

Commercial banks are expected to unveil more fixed-rate mortgage products to attract more borrowers amid rising money market rates, prompting a change in the way people borrow money from lenders to buy their houses. Analysts forecast the fixed-rate mortgage market will grow sharply in the coming months in line with a falling demand for mortgages of which interest rates are linked to money market rates.

Interest rates on certificates of deposit (CDs), the key money market rate determining floating-rate mortgage loans, is now hovering up to 7.74 percent, the highest in six years. Currently, about 95 percent of mortgage loans carry floating interest rates and rising CD rates have resulted in greater interest costs for borrowers. Shinhan Bank, the country’s second largest lender, said Sunday that it will sell housing loans with interest rates fixed for up to 30 years.

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