Reduced Listings and Skyrocketing Prices... What Will Happen to 'Jeonse Refugees' During the Fall Moving Season? (Comprehensive)

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

Last month, office worker Kim Seong-hwan (34, pseudonym), who secured a jeonse house in Dongjak-gu, Seoul, was rejected when he visited his main bank to raise the insufficient jeonse deposit. After visiting several banks, Kim barely managed to get a loan, but even now, thinking about that time makes him break out in a cold sweat. Kim lamented, "With the government's flawed real estate policies causing both house prices and jeonse prices to skyrocket, isn't it too harsh to block loans even for actual demand borrowers?" He added, "I'm already afraid of the maturity in two years."

[Asia Economy reporters Lee Kwang-ho and Song Seung-seop] 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 that 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 near 700 trillion won... 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 won as of the end of last month, up 4.1% (28.661 trillion won) from the end of last year (670.1539 trillion won).

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

A representative from Bank A explained, "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 loan curbs and total volume management from banks to suppress household loan growth to 5-6% in the second half, causing base interest rates to rise and preferential rates to decrease."

In fact, under pressure from financial authorities, banks have uniformly raised loan interest rates higher than the market rate increase 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 matter.

Experts: "Jeonse loans are products for actual demand borrowers... Measures needed to minimize shock"

Experts point out that the government has shifted the blame for its failed real estate policies to indiscriminate loan tightening. Inside the financial sector, there is a strong voice that this is the result of the real estate demand suppression policy that started early in the administration. A representative from a commercial bank said, "Government policies have made it difficult for landlords to offer or convert jeonse, and the household debt management stance has raised concerns about limits shrinking for actual demand borrowers. As jeonse prices have risen, many borrowers are trying to get loans in advance," he analyzed.

Park Hap-su, Senior Real Estate Specialist at KB Kookmin Bank, analyzed, "Jeonse prices are rising contrary to tenants' intentions. Moving to half-jeonse or monthly rent increases interest burdens, which is equivalent to a decrease 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."

Song Jae-won, Team Leader at Shinhan Bank PWM Seocho Center, said, "There are many capital gains tax regulations, and exemptions are only possible if the owner resides in the house. Although jeonse loans have not increased rapidly, psychologically, reducing limits causes demand to take loans in advance," he analyzed.

Oh Jeong-geun, Professor of Financial IT at Konkuk University Graduate School of Information and Communication, expressed concern, saying, "The government says 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 nonsense. With the new semester and fall moving season approaching, there are many 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 right. The basis of finance is credit, and if borrowers have the ability to repay, loans should be given. Financial authorities urgently need to ease loan regulations," he emphasized.

Professor Sung Tae-yoon of Yonsei University's Department of Economics also pointed out, "Financial authorities are ordering banks to keep household loan growth within 5-6% this year, but even considering the Bank of Korea's forecast for economic growth (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. Financial authorities need to devise more sophisticated management measures to minimize shocks to actual demand borrowers," he said.

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