Increase in Housing Mortgage Loans Exceeds 5 Trillion Won for 3 Consecutive Months... Authorities' Pressure Ineffective

Outstanding Mortgage Loans at 5 Major Commercial Banks Increased by About 5.26 Trillion KRW in July
Mortgage Loan Growth Expected to Exceed 5 Trillion KRW for 3 Consecutive Months Since May
Financial Authorities Pressure Banks for Management... Commercial Banks Raise Interest Rates One After Another
Concerns Over Last-Minute Demand Until September 'Stress DSR Phase 2' Implementation

Financial authorities continue to pressure banks to respond to the growing demand for household loans, but the upward trend, especially in mortgage loans, shows little sign of slowing down. The outstanding balance of mortgage loans at major commercial banks is expected to increase by over 5 trillion won for the third consecutive month since April.

According to the financial sector on the 29th, the outstanding balance of mortgage loans at major commercial banks such as KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup was recorded at 557.4116 trillion won as of the 25th. This marks a sharp increase of nearly 5.26 trillion won in less than a month from the 552.1526 trillion won recorded at the end of June, maintaining a 5 trillion won level increase for three consecutive months since May. The mortgage loan balance increased by 22.2604 trillion won in the first half of the year alone, hitting record highs this year with 4.3433 trillion won in April, 5.3157 trillion won in May, and 5.8467 trillion won in June.

As the rise in mortgage loans shows no signs of abating, financial authorities have reiterated their intention to manage the increase in household loans within the nominal GDP growth rate this year and have gathered commercial banks to urge active management. In particular, the Financial Supervisory Service is conducting inspections to verify whether banks have faithfully applied the Stage 1 Stress Debt Service Ratio (DSR) system.

In response to the pressure from financial authorities, banks have also been raising interest rates one after another. Hana Bank was the first to raise mortgage loan interest rates by 0.2 percentage points earlier this month, followed by Woori Bank and Nonghyup Bank, which simultaneously increased rates by 0.2 percentage points on the 24th. KB Kookmin Bank and Shinhan Bank will also raise mortgage loan interest rates by an additional 0.2 percentage points starting from the 29th.

Internet-only banks, which had benefited significantly from loan refinancing policies, have also joined the interest rate hikes. K-Bank raised mortgage loan interest rates on the 9th and 23rd, while KakaoBank increased mortgage loan interest rates by 0.1 percentage points on the 26th.

To slow down the pace of household loan growth, commercial banks are successively raising mortgage loan interest rates. On the 3rd, an interest rate notice was posted on the exterior wall of a bank in Namdaemun, Seoul. Photo by Jo Yongjun jun21@

Although financial authorities and banks continue to decide on interest rate hikes to manage household loans, it is uncertain whether the effects will be immediate. The implementation of Stage 2 Stress DSR, originally planned for July, has been postponed to September, and loan demand has increased due to rising housing prices, especially in Seoul.

In fact, the surprise strong performance of the five major financial groups in the second quarter and the first half of the year was driven by an increase in loan assets. Except for Nonghyup, the won-denominated loans of KB, Shinhan, Hana, and Woori Financial have increased by about 57 trillion won this year alone. Although credit loans have slightly decreased due to sustained high interest rates, the sharp rise in mortgage loans had a significant impact.

Some analysts suggest that there is a considerable possibility of a last-minute surge in loan demand before the application of Stage 2 Stress DSR, which financial authorities have firmly stated will be implemented in September. A financial sector official said, "Commercial banks generally expect steady mortgage loan demand until the implementation of Stage 2 Stress DSR in September," adding, "The recent interest rate hikes and the announced strengthening of Stress DSR have less impact on sentiment than the upward trend in housing prices."

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