Savings banks also sequentially halt jeonse loans... Growing balloon effect

Rising Jeonse Prices Slow 2nd-Tier Financial Loans
Korea Investment, Hanwha, CK Savings Banks Halt Jeonse Loans
Failing to Find Jeonse During Fall Moving Season Could Turn You into a 'Refugee'

On the 17th, ahead of the real estate brokerage commission reform, property listings are posted at a real estate agency in Songpa-gu, Seoul. Photo by Mun Ho-nam munonam@

Kim In-cheol (37, pseudonym), who lives on a jeonse lease in Dobong-gu, Seoul, found himself in a situation where he had to look for a new residence last month after the landlord notified him that they would move back in. The existing jeonse deposit was far from enough, so he hurried to the bank before the contract expired in November, but was told that loans were difficult due to higher thresholds. Struggling to find funds, Kim inquired at two to three savings banks, which he rarely used due to high interest rates, only to be dismayed by the news that they had completely stopped offering jeonse loan products. He lamented, "Jeonse deposits have dropped to about half the jeonse level in two years," adding, "Even after exhausting all my money, it’s tight, and I don’t know where to secure the remaining balance."

[Asia Economy Reporter Song Seung-seop] Following NH Nonghyup Bank, savings banks are also successively halting the sale of jeonse loan products. As real demand borrowers facing a loan cliff move to the secondary financial sector, savings banks under total volume regulation pressure appear to be slowing down their pace. There are concerns that households unable to secure sufficient funds amid soaring jeonse prices may become ‘jeonse refugees.’

According to the industry on the 7th, CK Savings Bank, based in Gangwon, recently stopped selling its ‘General Fund Loan (Jeonse Fund)’ product. A CK Savings Bank official explained, "The bank itself handles apartment interim payment loans, but the available limit has been fully used," adding, "For internal management reasons, we are not proceeding with personal loans or mortgage loans either."

CK Savings Bank’s jeonse fund loan product was still listed in the Savings Banks Association’s disclosure as recently as last month. The disclosure targets products with new loan amounts exceeding 300 million KRW in the previous month. The average interest rate on loans handled was a relatively low 4.5% (lump-sum repayment) even within the secondary financial sector, and the loan-to-value ratio (LTV) was up to 70%, but it is no longer available.

Korea Investment Savings Bank has stopped selling its rental apartment mortgage loan product, ‘Home Jeonse Loan 2.’ The fixed interest rate ranged from 3.72% to 8.49% annually, with limits from a minimum of 5 million KRW to a maximum of 300 million KRW.

Even in places that do not announce the suspension of product sales separately, guidance on jeonse fund loan products is disappearing. Six savings banks have already withdrawn their jeonse loan product information. Hanwha Savings Bank hinted, "Although demand is high, for various reasons including risk management, we have no plans to resume (jeonse loans) for the time being."

Some banks are conducting irregular operations rather than a full suspension. One savings bank stopped ARS guidance for jeonse loans handled until August. To receive jeonse loan consultations, it is difficult to use phone or non-face-to-face channels, and one must visit the on-site branch located in Jeollanam-do directly.

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