Bank of Korea Holds Interest Rate at 2.5% Amid Seoul Housing Market Surge

Seoul  – The Bank of Korea (BOK) kept its benchmark interest rate unchanged at 2.5% on Thursday, pausing to evaluate the impact of recent measures aimed at cooling Seoul’s overheated housing market and rising household debt.

Citing a “significant acceleration” in property prices and loan growth, the central bank emphasized the need to prioritize financial stability over short-term economic concerns. Housing prices in Seoul soared over 19% year-on-year in June, according to Goldman Sachs, prompting authorities to tighten mortgage lending rules.

“Evaluating macro policy effects is critical given risks in the housing sector,” the BOK stated.

Household Debt Driving Policy Caution

South Korea’s unique rental system, known as jeonse, contributes to high household debt, as renters typically borrow large sums for deposits. This has complicated the central bank’s monetary policy, especially amid a 6–7 trillion won surge in household loans over May and June.

Despite a 0.2% GDP contraction in Q1, the BOK refrained from cutting rates. Analysts expect rate cuts may come in August and November if property markets stabilize and inflation stays in check.

The BOK also flagged potential foreign exchange volatility, as trade tensions rise following U.S. President Donald Trump’s tariff threats on Korean imports.