Home foreclosures soar as borrowers fail to meet mortgage repayment obligations

Construction of a new apartment complex is underway in Seoul, March 17. Yonhap

By Yi Whan-woo

The number of homes that were foreclosed and put up for auction by the courts increased to the highest level in more than 11 years in March, data showed Sunday.

According to the Supreme Court’s statistical database on property registration, a total of 5,336 homes were put up for auction last month after their owners, who took out mortgages to buy them, failed to make their repayments on time.

In order to recover the money taken out by borrowers, the lenders, mostly banks, foreclosed the mortgaged properties and put them up for auction after going through the courts.

The March figure was the highest since January 2013 when 5,407 cases were reported.

By region, 1,510 homes were in Gyeonggi Province. The other 830 were in Busan and another 603 were located in Seoul.

In particular, it was the first time since April 2015 that more than 600 foreclosed homes were put up for auction in Seoul.

Industry sources expect that the number of foreclosed homes that have been put up for court-administered auctions annually will surge to a record high in 2024.

They noted that the number increased by 62 percent year-on-year to 2023.

“And the pace of increase is getting steeper this year,” a source said, noting that around 3,000 properties went up for auction per month in 2023, compared to more than 5,000 in March this year.

The sources said that the increase in such auctions is linked to the high interest rate, which burdens an ever-increasing number of borrowers when making their repayments, eventually causing them to give up their homes to the banks.

The benchmark interest rate stands at more than a 15-year high of 3.5 percent since January 2023.

Another source pointed out that a robust American economy may prompt the U.S. Federal Reserve to delay rate cuts and this will make the BOK hesitant to deliver its respective rate cuts.

The Fed’s benchmark overnight borrowing rate currently ranges between 5.25 percent to 5.5 percent, against the BOK’s 3.5 percent.

The rate difference suggests investors may pull out money from Korea in search of safe-haven assets if the BOK’s benchmark rate is lowered.

Upward pressure on inflation also stands in the BOK’s path regarding cutting the rate. Consumer prices stayed over 3 percent, which is higher than the BOK’s inflation target goal of 2 percent.