Banks, Household Loans Reach 700 Trillion Won... Demand Surges Ahead of Additional Regulations

As the Year-End Approaches, the 'Loan Shortage' Phenomenon Is Expected to Worsen

[Asia Economy Reporter Jin-ho Kim] As financial authorities have announced additional regulations on household loans, demand to catch the so-called 'last train for loans' has surged sharply. Since the authorities are focusing all efforts on strengthening the management of the total volume of household loans, the phenomenon of a 'loan famine' is expected to intensify from this month until the end of the year.

According to the financial sector on the 4th, as of the end of last month, the outstanding balance of household loans handled by the five major commercial banks?Shinhan, KB Kookmin, Woori, Hana, and NongHyup?was recorded at 702.8877 trillion won. This is an increase of 4.0728 trillion won compared to the previous month.

Looking at the outstanding balance of household loans, the balance of mortgage loans was 497.4174 trillion won, an increase of 4.0026 trillion won from the end of August (493.4148 trillion won). This is the largest monthly increase this year. This is analyzed as reflecting demand rushing to secure loans amid continuous house price rises and concerns that loans will be blocked. In fact, it is reported that dozens of inquiries per day are made at the frontline counters of major commercial banks asking whether loan execution is possible.

However, the balance of unsecured loans, which had surged due to 'debt investment (bit-tu)' and 'borrowing to the soul (yeong-kkeul)', recorded 140.9999 trillion won as of the end of last month, increasing by only 105.7 billion won compared to the end of August (140.8942 trillion won). This is largely due to banks reducing unsecured loan limits to about 100% of annual income and limiting most overdraft account limits to below 50 million won.

Although the outstanding balance of household loans in the banking sector has exceeded 700 trillion won, the growth rate is expected to slow significantly from this month. As banks have sequentially tightened lending, loans are expected to be further restricted toward the end of the year.

KB Kookmin Bank decided from the 29th of last month to operate the loan limit for jeonse deposit loans within the range of the increase in the tenant deposit amount when renewing lease contracts. Hana Bank is also reportedly internally reviewing reducing the loan limit for jeonse deposit loans within the range of the increase in tenant deposits. Industrial Bank of Korea has stopped selling loan products through agent channels.

The Korea Federation of Community Credit Cooperatives plans to decide this week on suspending new jeonse deposit loans and mortgage loans for non-members and quasi-members to comply with the household loan total volume growth rate target until the end of the year.

Meanwhile, financial authorities have set a target to manage the household loan growth rate at 5-6% this year, and since it has already entered the 5% range, strong additional regulations are also being announced. Early implementation of the Debt Service Ratio (DSR) 40% regulation and restrictions on jeonse loans are being strongly discussed.

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