First Day of Bank Loan Window Open... 'Yeongkkeul·Bittu' Becoming Cautious Amid DSR Regulations and Rising Interest Rates

Household Loan Growth Likely Won't Suddenly Surge After Last Month's Slowdown
Impact of DSR Phase 2 Implementation, Rising Loan Interest Rates, and Sluggish Real Estate and IPO Markets

[Image source=Yonhap News]

[Asia Economy Reporter Park Sun-mi] On the 3rd, the first day when the preferential interest rate for unsecured loans was raised by up to 0.6 percentage points, Mr. Kim Joo-hyuk (44), who had planned to take out a 100 million KRW unsecured loan ahead of home repair work next month, visited the counter of his main bank. However, after consulting with the branch staff, he requested only a 50 million KRW unsecured loan, less than originally planned. Thanks to the increased preferential loan rate, the interest rate on unsecured loans he could receive immediately dropped to around 3.5%, but due to the burden of interest on other loans he must repay, he decided to borrow only the funds he absolutely needed.

On the 3rd, the first day banks resumed selling loan products that had been suspended due to the reset of the household loan total volume management limit for the new year, the atmosphere at the counters of major commercial banks in Seoul was similar to usual, without any special 'rush.'

An employee in the loan consultation department at Bank A’s Gangnam branch said, "From this month, new mortgage loans for one-homeowners, which were not allowed until last month, have become possible, but not many people visited the bank counter to apply for loans," adding, "Even though new mortgage loan sales have fully resumed, actual loan transactions are rare due to the sluggish real estate market."

An employee at Bank B’s Yeouido branch also expected a surge of customers at the branch due to the revival of preferential interest rates on unsecured loans, but said there has been little difference compared to before the preferential rates were applied. He noted, "Even those taking out unsecured loans are facing continuously rising interest rates, so many customers are trying to borrow only as much as necessary," and added, "Unlike the previous 'Youngkkeul (borrowing to the limit)' and 'Debt Investment' craze, there is no atmosphere of trying to borrow as much as possible."

Although banks have loosened household loan management limits for the new year, improving lending capacity compared to the end of last year, loan execution is being carried out mainly for real demand. Most customers who have pre-consulted for necessary funds confirm the changed conditions in the new year before proceeding with the loan.

A Bank C official explained, "January is traditionally a low season for loans, and the immediate application of the second stage of the Debt Service Ratio (DSR) during the interest rate hike period is affecting loan decisions," adding, "Although banks have opened the door wider for loans, it is characteristic that more people are trying to borrow only as much as needed, focusing on real demand."

In fact, one commercial bank applied preferential interest rates to mortgage and jeonse (key money deposit) loans on the 3rd, but the outstanding balance showed little difference compared to the last week of December (27th?31st). Banks that applied preferential rates to unsecured loans also maintained similar levels in both the number and amount of new loans on the 3rd compared to the previous week.

The public offering subscription market, which had stimulated 'Youngkkeul' and 'Debt Investment,' is also quiet, so the prevailing view is that the household loan growth trend, which slowed last month, is unlikely to suddenly turn into a surge. Although there may be speculative demand to take out loans in advance when possible, anticipating higher loan thresholds this year as well as last year, the financial market environment makes a sudden surge unlikely.

Last month, the outstanding household loans of the five major banks?KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup?amounted to 709.0529 trillion KRW, increasing by only 364.9 billion KRW from the previous month. The combined effect of rising interest rates and regulations has curbed trillion-KRW-level growth. Among these, unsecured loan balances decreased by 1.5766 trillion KRW from the previous month to 139.5572 trillion KRW.

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