From the 30th, DSR Applied to Credit Loans Over 100 Million KRW for Income Exceeding 80 Million KRW
If Buying a House in Regulated Areas Within a Year with a 100 Million KRW Credit Loan, Loan Will Be Recalled
'Let's Get It First' Pre-Regulation Overdraft Account Openings Reach Record High
[Asia Economy Reporter Kim Hyo-jin] Starting today (the 30th), if you take out a credit loan exceeding 100 million KRW and purchase a house in regulated areas such as Seoul within one year, you must repay the loan. For high-income earners with an annual income exceeding 80 million KRW, the total debt service ratio (DSR), currently capped at 40%, will also apply when taking out credit loans over 100 million KRW from banks.
The financial authorities' 'Credit Loan and Household Loan Management Plan,' which significantly tightens regulations on large credit loans announced on the 13th, will be fully implemented.
Accordingly, from today, if a credit loan exceeding 100 million KRW is taken out and a house is purchased within one year in regulated areas such as speculative zones or speculative overheating districts, the loan will be recalled. The purpose is to prevent people from taking large credit loans in addition to mortgage loans for real estate investment.
However, this regulation applies on an individual borrower basis, not combined for couples. Loans taken before the 30th are not subject to this regulation.
Additionally, the DSR applied per borrower unit now includes credit loans over 100 million KRW for those with annual incomes exceeding 80 million KRW. An annual income of 80 million KRW corresponds to the top 10% income bracket. Currently, a 40% DSR regulation is applied individually to bank loans secured by houses priced over 900 million KRW in regulated areas. DSR is the ratio of the annual principal and interest repayment amount of all household loans, including mortgage loans, credit loans, and card loans, to annual income, indicating the debt burden relative to income.
Financial authorities have tightened regulations on large credit loans as household debt overheated due to the effects of 'Yeongkkeul' (borrowing to the limit) and 'Bitchu' (investing with borrowed money), and some commercial banks have proactively started loan regulations.
KB Kookmin Bank has applied the 'DSR 40% or less' regulation since the 23rd to borrowers whose credit loans exceed 100 million KRW (combined credit loans from KB Kookmin Bank and other banks).
In particular, KB Kookmin Bank considers any credit loan exceeding 100 million KRW as subject to DSR regulation regardless of income. This is a stricter regulation than the financial authorities' guideline targeting those with annual incomes over 80 million KRW. Also, to curb excessive credit loans relative to income, since the 23rd, credit loans are only granted within 200% of annual income.
Shinhan Bank also began applying DSR regulations on credit loans exceeding 100 million KRW for borrowers with annual incomes over 80 million KRW starting at midnight on the 27th (the 28th).
In the case of NongHyup Bank, from the 30th, in addition to the authorities' guidelines, the limit on its main non-face-to-face credit loan product, 'All One Workplace Loan,' will be reduced from 150 million KRW to 100 million KRW, and the preferential interest rate of 0.3 percentage points for excellent credit grades on 'All One Workplace Loan' and 'All One Minus Loan' will be completely removed.
Meanwhile, as the introduction of regulations was announced, there was a surge in speculative demand to 'just get the loan first.' As a result, the number of credit loans and overdraft accounts increased sharply. According to the financial sector, the total credit loan balance of five major commercial banks?KB, Shinhan, Hana, Woori, and NongHyup?increased by 2.1928 trillion KRW from the announcement of the regulation on the 13th to the 26th. This amount nearly matches the total increase in October (2.4563 trillion KRW) and exceeds the increase in September (2.1121 trillion KRW).
Also, the number of newly opened overdraft accounts in these five banks on the 1st day (one day) was counted at 6,681 on the 23rd. This is 3.5 times the 1,931 accounts on the 12th, just before the credit loan regulation including overdraft accounts was announced on the 13th. Around the 23rd, the numbers were ▲ 6,324 on the 20th ▲ 6,324 on the 24th ▲ 5,869 on the 25th ▲ 5,629 on the 26th.
A representative from a commercial bank said, "According to the bank's internal statistics, the number of overdraft accounts set up daily recently is at an all-time high," adding, "We understand that other banks are in a similar situation."
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