Bank Loan Preferential Interest Rates and Limits Restored... Resumption of Suspended Household Loans (Comprehensive)

Loan Thresholds Can Increase Anytime When Credit Limits Are Reached

[Asia Economy Reporter Park Sun-mi] Lee Jin-young (42, pseudonym), who requested a loan review from a foreign bank at the end of October to prepare funds for a jeonse eviction in January next year, recently applied for a loan again at his main bank. He heard that the credit limit and interest rate would be more flexible than last month. Lee said, "At that time, I applied to wherever possible in a hurry because the main bank might not approve the loan," adding, "Recently, the loan threshold seems to have lowered a bit, so I reapplied at my main bank because they said a transaction was possible."

The funding channels for ordinary people, which had been blocked due to the government's household loan regulations, are expected to temporarily open early next year. This is because banks will restore preferential interest rates that had been reduced and resume the sale and normalization of loan products and limits following the reset of the total household loan volume limit for the new year. However, since the total household loan target for the financial sector next year is lower than this year and the second phase of the Debt Service Ratio (DSR) regulation will be implemented, the loan cliff phenomenon for real demand borrowers is expected not to improve significantly.

According to the banking sector on the 27th, Woori Bank will increase preferential interest rates by up to 0.6 percentage points on 10 types of unsecured loans and 4 types of mortgage loans starting from the 3rd of next month. Raising preferential interest rates has the effect of lowering loan interest rates. The maximum preferential rate for the representative unsecured loan product, the Employee Loan (including non-face-to-face), will rise to 0.9%. The maximum discount rate for subsidiary transactions will also be restored from none to 0.4 percentage points for the Woori WON mortgage loan. This is a partial restoration of preferential interest rates that had been reduced for household loan volume management.

KB Kookmin Bank will lift all temporary loan restrictions previously applied, such as mortgage credit insurance (guarantee) loans, at the beginning of this month. Only the restriction allowing loan applications within the increased amount when renewing jeonse loans remains. Although it is not yet confirmed whether preferential interest rates will be adjusted, the bank is open to changing interest rate operation standards early next year considering business conditions.

NH Nonghyup Bank will fully resume mortgage loans, which had been suspended since August, in January next year. The credit loan limit, which had been lowered to 20 million KRW, will be restored to 100 million KRW starting next month. The bank is also reviewing expanding preferential interest rates.

Internet Banks Also Resume Loans
Despite Stricter DSR Regulations Making Loans Tighter... Loan Resumption Early Next Year Provides Some Relief

SC First Bank, which had suspended new mortgage loan sales, is accepting pre-applications for new mortgage loans (First Home Loan) from customers starting the 20th of this month in preparation for resuming loans in January next year. Internet-only banks such as KakaoBank and Toss Bank will also simultaneously resume new loans next month. In particular, KakaoBank is preparing to launch a new non-face-to-face mortgage loan early next year.

The severely dried-up bank loans began to normalize last month when Hana Bank resumed sales of non-face-to-face products such as Hana OneQ unsecured loans and Hana OneQ apartment loans. Subsequently, Kookmin Bank and SC First Bank also joined in resuming loans. Although the household loan growth rate in the second half approached the financial authorities' recommended range (5-6% annually), the total volume limit will be reset early next year, creating loan capacity.

Some voices express concern that an initial first-come, first-served loan phenomenon may recur among real demand borrowers who urgently need money. Since the financial authorities plan to manage next year's household debt growth rate at 4-5%, lower than this year, and banks will shift household loan management from annual to monthly and quarterly bases, loan thresholds could rise anytime once limits are reached.

A bank official explained, "Although all household loans will resume normally on January 3 next year, limits will be imposed on housing (mortgage, jeonse) and non-housing loans to conduct thorough total volume management, focusing on supplying funds to real demand borrowers (such as those without homes or those disposing of one home)."

Some expect that although loan thresholds may temporarily lower early next year, the strengthened DSR regulations will prevent the usual year-end surge in loans. Another bank official said, "Loan conditions will improve compared to the second half of this year, but with the implementation of the second phase of DSR next month, a 40% DSR will apply to borrowers with total loans exceeding 200 million KRW, so loans will be focused on real demand borrowers."

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