Household Loans Surge by 7.6 Trillion Won in One Month; Banks Tighten Lending

[Anchor]

Household loans from the banking sector have surged by a staggering 7.6 trillion won in just one month. With mortgage loans, in particular, seeing a sharp increase, major banks have begun to tighten their lending criteria.

Reporter Min Gyeongho has the story.

[Reporter]

Starting tomorrow, July 10, KB Kookmin Bank will cap its mortgage loan limit at 300 million won, regardless of the region.

Currently, when purchasing a home in the Seoul metropolitan area or regulated zones, borrowers can receive up to 600 million won for properties valued at 1.5 billion won or less, and up to 400 million won for those valued at 2.5 billion won or less. However, the bank has decided to reduce these limits on its own.

[Prospective Homebuyer: Today is the last day to get a loan under the 600 million won limit, so I visited the bank to apply for a mortgage. I saw the news about the reduction and rushed here to get the loan today.]

Other commercial banks have also begun to temporarily suspend loans processed through loan solicitors or restrict enrollment in mortgage insurance, which effectively increases the mortgage loan limit.

Banks are raising the bar for loans due to the rapid growth in household debt.

As of the end of last month, household loans at deposit-taking banks increased by 7.6 trillion won compared to the end of May.

This marks the largest monthly increase in one year and ten months, with mortgage loans accounting for 4.3 trillion won of that total.

Analysts suggest that the increase is driven by a rise in property transactions ahead of measures to impose heavier capital gains taxes on multi-home owners, as well as the recent rise in housing prices in the Seoul metropolitan area.

If this trend continues, there is a high possibility that banks will exhaust their annual loan quotas before the end of the year, prompting them to take preemptive measures.

However, some express concerns about side effects, such as demand shifting to financial institutions with less favorable loan terms following the news of the limit reductions.

[Jung Hwa-young, Research Fellow at the Korea Capital Market Institute: If these changes happen suddenly, it can disrupt plans for purchasing a home, and it could also lead to a rush of demand from people wanting to secure loans while they still can.]

With recent stock market volatility highlighting the risks of so-called debt-financed investments, financial authorities have ordered not only banks but also non-banking financial institutions, such as insurance and credit card companies, to make efforts to manage household loans.

(Video reporting: Kim Se-kyung, Video editing: Jung Yong-hwa)

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