Author: Hosung Jung(BOK)
This paper analyzes changes in home mortgage loan delinquencies related to the interest rate factor and the risk factor, using the personal mortgage lending and delinquency panel data held by the Bank of Korea. It finds that changes in the probability of mortgage loan default have been affected mainly by the interest rate factor since 2012. It finds, in addition, that the effects of the interest rate and risk factors in determining the default probability differ depending upon borrowers’ ages and their income-to-loan ratios. Specifically, while the probabilities of home mortgage loan default due to the interest rate factor have dropped regardless of personal characteristics since 2012, for borrowers in their 20s to 30s and those with low income-to-loan ratios the probability of default caused by the risk factor is found to have risen compared to June 2012. This is the first study to estimate the factors causing default based on personal borrower characteristics through use of personal lending and delinquency panel data. It is believed that our study may provide important information about the sources of mortgage loan risk and accordingly help in putting forward alternative policy responses.