Stock market instability and interest rate hikes... Debt-fueled investors who used overdrafts face a 'double whammy'

The interest rate for Mr.
052% per annum. 025%. He complained that he had suffered losses after investing in stocks using his overdraft account, and now the burden of interest payments has increased as well. With the outstanding balance of overdraft accounts at the five major banks (KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup) approaching 44 trillion won, the interest burden on borrowers is growing as both the Bank of Korea's base rate and market interest rates rise.
Concerns are rising that borrowers engaging in leveraged investing could simultaneously shoulder the burden of investment losses and increased interest payments. 9644 trillion won as of the 27th. 2812 trillion won recorded at the end of last month. 8330 trillion won in June.
"The balance of overdraft accounts, which had been increasing until the 20th, temporarily decreased as salaries came in on payday. However, it is rising again as credit card payments and loan principal and interest are being withdrawn," a financial industry official said. "There is a possibility that the balance will exceed 44 trillion won by the end of this month.
" It appears that the expansion of overdraft accounts was influenced by demand for leveraged investment driven by stock market volatility. It is highly likely that individual investors, viewing falling stock prices as an opportunity to buy at low prices, drew funds from their overdraft accounts. The problem is that borrowers who invested in stocks using overdraft accounts are highly likely to have suffered losses due to the recent roller coaster market conditions.
In fact, the period of the surge in overdraft account balances coincided with sharp fluctuations in the stock market. 55 (based on closing price) on the 22nd of last month, the KOSPI fluctuated before falling by more than 10% on this day, even dropping below the 6,000 mark during trading. On top of this, upward pressure on interest rates is placing a double burden on borrowers of overdraft accounts.
The financial sector believes that given the rising trend in market interest rates, it is highly likely that loan interest rates will face upward pressure for the time being. Borrowers of variable-rate overdraft accounts will be subject to these interest rate increases sequentially. Another financial industry official stated, "While it is common for overdraft balances to temporarily decrease on payday, this downward trend has not lasted long recently," adding, "This appears to be due to a weakened ability to repay loans as funds moved to the stock market are tied up due to falling stock prices or incur losses.
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[email protected] Ye Byeong-jeong Reporter