[Exclusive] "40-Year Mortgages Available"... Banks Ramp Up Aggressive Sales Amid Market Confusion

Aggressive Loan Sales Surge Following the June 27 Measures
Loan Demand Expected to Decline in the Second Half Due to Stronger Lending Regulations

Some commercial banks have been intensifying their final push for mortgage loan sales through loan brokerage firms. With the implementation of the third stage of the Debt Service Ratio (DSR) regulation starting in July and the June 27 Household Debt Management Measures, banks do not expect a significant increase in loan demand in the second half of the year. As a result, there is a sense that this may be the last opportunity for aggressive loan sales.

▲A loan agent from a commercial bank is conducting loan sales for a bank that offers 40-year mortgage loans.

According to the financial sector on July 3, commercial banks have ramped up their final round of loan sales following the announcement of the June 27 Household Debt Management Measures. The June 27 measures are considered extremely strict regulations, as they uniformly cap the maximum mortgage loan amount at 600 million won regardless of the borrower's repayment ability and shorten the maximum mortgage loan maturity to 30 years. Amid confusion in the market, banks are engaging in opportunistic sales.

One loan agent explained, "If the contract was signed and the deposit paid before June 27, when the regulations were announced, a 40-year mortgage is still possible without issue," adding, "Currently, Bank A and Bank B are offering this option."

Another loan agent stated, "For those who completed their contract and deposit payment before June 27, 40-year mortgages are available at Bank B, Bank C, and D Life Insurance, with interest rates around 4% depending on performance and conditions."

Previously, in response to financial authorities' calls for household debt management, commercial banks announced that they would temporarily suspend accepting mortgage applications through loan agents or manage them by assigning specific limits.

An official from a commercial bank commented, "We are operating by assigning handling limits to each loan brokerage firm, and I understand that applications are being accepted where limits are still available."

In fact, among commercial banks, Hana Bank and Shinhan Bank did not see a significant increase in mortgage loans from the beginning of this year through May. Among the five major commercial banks, from January to May this year, NH Nonghyup Bank recorded the highest mortgage loan growth rate at 5.6%, followed by Woori Bank at 2.4%, Shinhan Bank at 1.6%, KB Kookmin Bank at 1.4%, and Hana Bank at 0.8%.

Branch offices of commercial banks are also busy. Unlike previous policies, the June 27 Household Debt Management Measures were implemented immediately without any grace period, resulting in a flood of inquiries. In addition, there has been a surge in mortgage applications as borrowers rushed to sign contracts to avoid the third stage of the DSR regulation. An employee at a commercial bank branch said, "These days, working overtime has become routine, and there is no such thing as a set time to leave work," adding, "This is because there is a backlog of mortgage loan reviews for loans that need to be disbursed in July or August."

Meanwhile, some have criticized the sales tactics of commercial banks. Despite an environment of falling interest rates, banks have maintained high rates for household loans under the pretext of household debt management, and are now taking advantage of market confusion. Previously, commercial banks kept mortgage rates high even as interest rates declined, citing household debt management. In July, banks raised mortgage rates across the board. For example, Woori Bank increased its main mortgage rate by 0.06 percentage points from an annual 3.51-4.71% as of June 30 to 3.57-4.77% as of July 1. This was done by raising the spread, even though the benchmark rate used to calculate mortgage rates actually fell by 0.01 percentage points. Shinhan Bank raised its rates by 0.08 percentage points compared to the previous month, and Hana Bank increased the refinancing loan rate from 4.23% per annum on June 30 to 4.33% per annum as of July 1, a 0.1 percentage point increase. As a result, real demand borrowers are expected to face a heavier interest burden.