Financial authorities have urged banks to check household loan regulations to prevent loan concentration. Some banks, which had engaged in an 'operational drive' during the tumultuous regime change, are expected to raise the lending threshold again.
According to the financial sector on the 16th, financial authorities convened the vice presidents in charge of household loans from 18 banks at 3 p.m. that day for a closed emergency meeting to inspect household loans. This was due to the surge in last-minute demand ahead of the implementation of the three-step Total Debt Service Ratio (DSR) regulation next month, combined with increased expectations for a rise in the real estate and stock markets, resulting in a rapid increase in household loans.
The total household loans in the financial sector have shown an increasing trend after decreasing in January of this year by 900 billion won, with increases noted in February (4.2 trillion won), March (700 billion won), April (5.3 trillion won), and May (6 trillion won). It is expected that household loans will increase by more than 5 trillion won this month. From the five major commercial banks, including KB Kookmin, Shinhan, Hana, Woori, and NH NongHyup, household loans surged by about 2.7 trillion won until the 13th.
During the meeting, financial authorities received reports on the status of household loans in the first half of this year by bank and urged them to exercise restraint in excessive mortgage loans and to comply with the targets for household loan increases. An attendee noted, "The financial authorities urged to manage household loan concentration well and also requested banks to restrain loans to multiple homeowners and check household loan regulations accordingly."
Financial authorities pointed out the excessive handling of household loans by some banks as a problem. At NongHyup Bank and SC First Bank, household loans reportedly increased by nearly 2 trillion won just last month. A financial authority official said, "There is a phenomenon of loan concentration in some banks, and under such circumstances, 'loan suspension' could occur, as seen in the latter half of last year," and emphasized the need to strengthen management of household loans to avoid harming genuine borrowers. Banks receive annual household loan quota management targets from financial authorities each year, so if loans are excessively issued in the first half of the year, it can be challenging to increase loans in the second half, making suspension inevitable.
Banks that had been easing loan regulations this month are expected to raise the lending thresholds again. Earlier, Shinhan Bank extended the maximum mortgage term from 30 years to 40 years at the beginning of this month. As loan maturity increases, the loan limits available will also rise. Hana Bank doubled its non-face-to-face mortgage limit from 500 million won to 1 billion won. A representative from one commercial bank stated, "We are reviewing options to tighten loan regulations again."
Financial authorities have indicated that they will conduct on-site inspections for banks where household loans have surged. If the increase cannot be controlled afterward, additional measures may become unavoidable. There are discussions within and outside the financial sector that the government may completely ban mortgages on high-priced dwellings. During the Moon Jae-in administration, mortgages on apartments exceeding 1.5 billion won in speculative areas and overheated districts were prohibited. A political insider noted, "Currently, there are voices within the ruling party arguing that stringent loan regulations are necessary at the beginning of the administration," adding, "The financial authorities believe it is not so severe, but the intensity of regulation may increase."