1780 Trillion Won Household Loans... Authorities and Banks Launch All-Out Effort to Suppress Demand

Bustling Seoul Real Estate Market... Concerns Over Stimulated Loan Demand
Financial Authorities and Banks Announce Bold Household Debt Measures
Shinhan Bank Suspends 'Conditional Jeonse Loan' for 'Gap Investment' Demand
KB Kookmin Raises Credit Loan Interest by 0.2%P... Shinhan Also Adds Rate Hike

Financial authorities and banks are rapidly rolling out household debt measures in response to concerns that the buoyant real estate market centered in Seoul could further stimulate the increase in household loans. Immediately after the financial authorities announced that from September, they would apply a 1.2 percentage point stress Debt Service Ratio (DSR) interest rate specifically to mortgage loans in the metropolitan area, Shinhan Bank decided to temporarily suspend conditional jeonse deposit loans starting from the 26th, and KB Kookmin Bank raised household credit loan interest rates by 0.2 percentage points from the 22nd.

According to financial sources on the 22nd, Shinhan Bank decided to halt conditional jeonse deposit loans, which it had been handling, starting from the 26th after internal discussions. Shinhan Bank had been providing jeonse deposit loans based on conditions such as transfer of ownership by the landlord, cancellation of senior claims, and disposal of the house. A Shinhan Bank official explained, "This is a preemptive measure to manage in line with the government's strengthened household debt management trend." Earlier, the financial authorities instructed banks to calculate the total debt service ratio (DSR) for all new household loans starting in September. Since policy loans and jeonse loans, which were previously exempt from DSR application, are now included in the calculation, banks plan to establish customized management plans.

Shinhan Bank's move is interpreted as a response to the judgment that increasing gap investment demand centered in Seoul could further stimulate household loan demand. This measure targets the fact that gap investors often raise jeonse deposits and require jeonse tenants to take out more jeonse deposit loans to minimize their own investment.

Furthermore, from the 26th, Shinhan Bank will also stop handling Plus Mortgage Loans (MCI·MCG). Without MCI·MCG, loans can only be made for amounts excluding small rental deposits, which is expected to reduce loan limits. Since this insurance is subscribed simultaneously with mortgage loans, the banking sector explains that loan limits will be reduced by 55 million KRW in Seoul, 48 million KRW in Gyeonggi Province, 28 million KRW in metropolitan cities, and 25 million KRW in other areas.

Commercial Banks Repeatedly Raise Loan Interest Rates to Manage Last-Minute Loan Demand

Commercial banks are responding to last-minute loan demand by raising loan interest rates ahead of the implementation of the second phase of stress DSR in September. KB Kookmin Bank, after suspending mortgage loans for cases involving refinancing from other banks and additional home purchases by existing homeowners, will raise interest rates on some credit loan products by 0.2 percentage points starting from the 22nd.

KB Kookmin Bank plans to uniformly raise interest rates on KB On-Gukmin Credit Loan, KB Workplace Reliable Credit Loan, KB Teacher Reliable Credit Loan, KB Military Reliable Credit Loan, KB Payroll Transfer Credit Loan, and KB STAR CLUB Credit Loan. Last month, KB Kookmin Bank raised mortgage loan interest rates twice and this month increased jeonse deposit loan interest rates by 0.3 percentage points and face-to-face mortgage loan interest rates by 0.3 percentage points.

Shinhan Bank, which for the first time has also targeted conditional jeonse deposit loans, plans to raise interest rates on housing-related loans by up to 0.4 percentage points on the 23rd. Interest rates for new purchases and living stabilization funds will increase by 0.20 to 0.40 percentage points, and jeonse deposit loans will rise by 0.10 to 0.30 percentage points depending on the guarantee institution. This follows the previous day’s increase of up to 0.3 percentage points in mortgage loan interest rates, marking an additional hike.

Additionally, Hana Bank has strengthened loan monitoring for multi-homeowners, and Woori Bank plans to continuously review measures to reduce household loans through further interest rate hikes.

A senior official from the financial sector explained, "Despite the government's intention to curb loans, demand, especially for mortgage loans, has not easily subsided, and there remains a possibility of concentrated last-minute loan demand ahead of the second phase stress DSR implementation, prompting banks to take measures to suppress various loans. The successive tightening of thresholds for jeonse deposit loans is also part of demand management."

Meanwhile, according to the Bank of Korea, household loan balances reached 1,780 trillion KRW at the end of June, an increase of 13.5 trillion KRW compared to the end of the first quarter. As of the 14th of this month, the household loan balances of major commercial banks including KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup Bank totaled 719.9178 trillion KRW, increasing by 4.1795 trillion KRW this month.

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