[One Month After the December 16 Measures] Historic-Level Regulations Cause Bank Mortgage Loan Growth to Decline from the Start

Slowing Growth in Mortgage Loans at 5 Major Commercial Banks
December Last Year Increase Down 0.4%p from Previous Month

[Asia Economy Reporter Kim Hyo-jin] Following the implementation of the comprehensive real estate measures on December 16, which include a complete ban on mortgage loans for apartments priced over 1.5 billion KRW, the growth rate of mortgage loans at major banks has slowed down.

As the government continues to sharpen its stance in the war against real estate speculation and with new loan-to-deposit ratio regulations, banks have no choice but to manage their loan and deposit balances, suggesting that the contraction in mortgage loans is expected to deepen further.

According to the financial sector on the 15th, the total outstanding mortgage loans at the five major commercial banks?KB Kookmin, Shinhan, KEB Hana, Woori, and NH Nonghyup?stood at 409.9279 trillion KRW at the end of December last year, marking only a 0.3% increase from the previous month. At the end of November, the balance was 408.8049 trillion KRW, which was a 0.7% increase from the previous month. This indicates a 0.4 percentage point slowdown in the growth rate of mortgage loans.

Looking at each bank, KB Kookmin Bank's balance at the end of December was 81.7566 trillion KRW, showing only a 1.8% increase compared to the end of the previous month. Shinhan Bank recorded 77.1116 trillion KRW, up 0.5%, a decrease of 1.0 percentage point from the previous month. KEB Hana Bank's balance rose by 1.1% to 83.2492 trillion KRW, the only one among the five banks to see a 0.3 percentage point increase.

Woori Bank and NH Nonghyup Bank saw their balances decline. Woori Bank's mortgage loan balance at the end of December was 93.785 trillion KRW, down 1.5% from the previous month. This is a 1.4 percentage point larger decrease compared to the 0.1% drop in October and November. NH Nonghyup Bank decreased by 0.5% in November and further declined by 0.4% to 74.0255 trillion KRW in December.

An official from a commercial bank said, "While the change in trend is not very pronounced, considering that this is the early stage of the measures' implementation, it appears to be meaningful."

The government's shift in financial policy direction and related measures are expected to further tighten mortgage loans. A representative example is the new loan-to-deposit ratio regulation implemented this year. When calculating the loan-to-deposit ratio, the weight for household loans was increased by 15 percentage points, while that for corporate loans was decreased by 15 percentage points, aiming to encourage banks to increase corporate loans instead of household loans.

To comply with this regulation, banks must either reduce household loans or increase deposits. Financial Services Commission Chairman Eun Sung-soo recently reiterated several times his intention to shift the flow of finance from households to corporations, especially small and venture businesses, stating, "Financial funds are flowing into unproductive sectors such as real estate, increasing economic inefficiency."

An official from the financial sector said, "The flow of loans is closely related to the overall policy direction and momentum. Although the proportion of consumers affected by real estate loan regulations may not be overwhelmingly large, the combined effect of macro policy direction and detailed measures seems to be dampening consumer sentiment overall."

This content was produced with the assistance of AI translation services.