Shortage of Listings and Soaring Prices in 'Jeonse'... "What Should Real Buyers Do If Loans Are Also Difficult?"

Household Loans at 5 Major Banks Reach 698 Trillion KRW in August, Up 4.1% in One Month
Jeonse Loans Increase by 14.7543 Trillion KRW, Accounting for Half of Total Growth
Experts Say "Jeonse is a Housing Product for Ordinary People, Impact Should Be Minimized"

Last month, Kim Seonghwan (34, pseudonym), an office worker who secured a jeonse house in Dongjak-gu, Seoul, visited his main bank to cover the insufficient jeonse deposit but was rejected. After visiting several banks, Kim barely managed to get a loan, but just thinking about that time still makes him break out in a cold sweat. Kim lamented, "With the government's flawed real estate policies, not only house prices but also jeonse prices have skyrocketed, yet they are blocking loans even for actual demand borrowers. Isn't that too harsh?" He added, "I'm already afraid of the maturity in two years."

[Asia Economy Reporters Lee Kwangho and Song Seungseop]More than half of the increase in total household loans this year has been in jeonse loans, which are strongly characterized by actual demand. This means that 5 out of 10 borrowers are actual demand borrowers like Kim. As Kim said, the situation is not that loans increased because house prices rose, but rather loans increased because house prices rose. With the government's tightening of loans combined with interest rate hikes, the burden on actual demand borrowers is growing day by day.

Household Loans Approaching 700 Trillion KRW... Jeonse Loans Account for 51% of Total Increase

According to the financial sector on the 7th, the outstanding household loans of the five major banks?KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup?stood at 698.8149 trillion KRW as of the end of last month, up 4.1% (28.661 trillion KRW) from the end of last year (670.1539 trillion KRW).

Among these, mortgage loans increased by 19.6299 trillion KRW, accounting for 68.4% of the total increase in household loans. In particular, jeonse loans rose by 14.7543 trillion KRW, exceeding half (51.4%) of the total increase.

A representative from Bank A explained, "Since the beginning of this year, the nationwide increase rates for house prices and jeonse prices have been in double digits. It is natural that mortgage loans and jeonse deposit loans increase along with the rise in house and jeonse prices. However, the financial authorities are demanding banks to curb loan growth and manage total loan volume to keep the household loan growth rate at 5-6% in the second half of the year, resulting in rising additional interest rates and reduced preferential rates."

In fact, under pressure from financial authorities, banks are uniformly raising loan interest rates higher than the market rate increases to suppress loans. KB Kookmin Bank and Shinhan Bank raised the variable interest rates on jeonse deposit loans from 2.64-3.84% to 2.79-3.99% and from 2.77-3.87% to 2.97-4.07%, respectively. Woori Bank also reduced preferential rates, and NH Nonghyup Bank suspended loan issuance last month after exceeding its household loan target. Hana Bank is currently reviewing the situation.

Experts: "Jeonse Loans Are Actual Demand Products... Measures Needed to Minimize Impact"

Experts point out that the government is blaming its real estate policy failures on indiscriminate loan tightening.

Park Hapsu, Senior Real Estate Specialist at KB Kookmin Bank, said, "Jeonse prices are rising contrary to tenants' intentions. Switching to half-jeonse or monthly rent increases interest burdens, which is equivalent to a reduction in income." He added, "In the case of jeonse deposit loans, excessively raising guidelines in the name of housing stability for low-income and actual demand borrowers has its limits."

Oh Junggeun, Professor of Financial IT at Konkuk University Graduate School of Information and Communication, said, "The government claims that since a lot of money is circulating in the market, it has no choice but to tighten the money supply to curb house prices. But trying to curb house prices by tightening money supply without increasing supply is nonsensical. With the new semester and autumn moving season approaching, there is a lot of housing sales and rentals, but actual demand borrowers who cannot borrow money will eventually turn to secondary financial institutions and loan sharks." He continued, "Applying loan regulations equally to all borrowers is not appropriate. The basis of finance is credit, and if borrowers have the ability to repay loans based on credit, they should be lent money. The financial authorities urgently need to ease loan regulations."

Seong Taeyoon, Professor of Economics at Yonsei University, also said, "The financial authorities are ordering banks to keep the household loan growth rate below 5-6% this year, but even considering the Bank of Korea's forecasted economic growth rate (4%) and inflation rate (1.7%), this level is exceeded. House prices are rising daily, and cutting off funding so recklessly is essentially telling people to use private loans. The financial authorities need to develop more sophisticated management measures to minimize the shock to actual demand borrowers."

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