With Banks Pulling Out, Secondary Financial Sector Blocked... Chaotic Loan Market

Saemaeul Geumgo to Fully Suspend Housing Mortgage Loans from the 29th
Balloon Effect Caused by Excessive Total Volume Regulation
Increased Hardship for Low-Income and Low-Credit Citizens

[Asia Economy Reporter Kim Jin-ho] Saemaeul Geumgo, which operates 1,300 branches nationwide, has completely stopped handling mortgage loans. Although there were recent reports of loan resumption mainly at some banks, the situation has led to a freeze on loans in the secondary financial sector. Critics point out that the loan market has fallen into complete "chaos" due to a balloon effect caused by the government's excessive total volume regulation.

According to the financial sector on the 29th, Saemaeul Geumgo has suspended the sale of four types of household loan products, including housing purchase loans and balance payment loans for pre-sale houses, at all branches starting from that day. In addition, loans through loan recruitment corporations have also been restricted. They have also decided not to pay fees on all household loans secured by housing, including living stabilization funds. (Refer to our report on the 26th [Exclusive] Saemaeul Geumgo also completely stops household loans from the 29th... Regulation 'Balloon Effect')

The main reason Saemaeul Geumgo has completely stopped handling mortgage loans is the concentration of demand that could not pass the bank threshold due to total volume regulation. Earlier in August, starting with NH Nonghyup Bank, major city and regional banks raised their loan thresholds one after another.

According to the Bank of Korea, Saemaeul Geumgo's household loan balance showed little change in the first half of this year. It increased by only 473 billion KRW over six months, from 61.394 trillion KRW at the end of last year to 61.868 trillion KRW at the end of June. However, the increase accelerated in the second half of the year. From the end of June to the end of September, it rose by 898 billion KRW in just three months.

In particular, the increase in October and November was also unusually large. Although financial authorities required portfolio changes such as reducing the proportion of secured loans and submission of weekly household loan increase amounts to prevent the balloon effect toward secondary financial institutions like Saemaeul Geumgo, the effect was minimal. An insider familiar with internal affairs hinted, "Due to the balloon effect caused by loan restrictions at other financial institutions, Saemaeul Geumgo's household loans sharply increased especially in November," adding, "It is understood that the increase exceeded the targets set by the financial authorities."

Other secondary financial institutions are also expected to continue tightening loans. The Financial Supervisory Service reportedly issued guidelines to savings banks, Saemaeul Geumgo, and local Nonghyup units to lower their household loan growth targets for next year compared to this year. Considering that low-income and low-credit citizens are the main customers, it is analyzed that they will face a more severe "loan famine" than this year.

Meanwhile, mortgage loan interest rates at insurance companies have also surged. Within a month, all products with the lowest interest rates in the 2% annual range have disappeared, and products exceeding 5% annually are increasing. Insurance companies are also facing considerable demand that has flocked to avoid total volume regulation, and the interest rate hikes have further increased the burden on borrowers.

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