Shinhan Bank Reduces Preferential Interest Rate on Real Estate Loans by 0.2%P

[Image source=Yonhap News]

[Asia Economy Reporter Kwangho Lee] Shinhan Bank announced on the 4th that starting from the 5th, it will lower the preferential interest rates on mortgage loans and real estate loans by 0.2 percentage points. This effectively means that the interest rates on related loans will increase by 0.2 percentage points.

The preferential interest rates on some jeonse deposit loans (guaranteed by Korea Housing Finance Corporation and Korea Housing & Urban Guarantee Corporation) will also be reduced by 0.2 percentage points. The bank explained that this change in interest rate policy aims to focus on actual funding demand such as low-income financial support and funding for small business owners and small and medium enterprises, given the recent sharp increase in household loans.

Shinhan Bank will also temporarily suspend the sale of Mortgage Credit Insurance (MCI) loans and Mortgage Credit Guarantee (MCG) loan products. MCI and MCG are insurance policies subscribed simultaneously with mortgage loans. Borrowers who subscribe to this insurance can receive loans up to the Loan-to-Value ratio (LTV), but without the insurance, loans are only possible up to the amount excluding small rental deposits. The disappearance of these insurance-linked mortgage loan products means that the mortgage loan limit will effectively decrease.

The reason for restricting real estate-related loans like this is that although the recent surge in unsecured loans has calmed down, demand for housing-related loans remains high. As of the end of last month, the total household loan balance of the five major banks?KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup?was 678.1705 trillion won, an increase of 3.7967 trillion won from the end of January (674.3738 trillion won).

Mortgage loans increased from 476.3679 trillion won to 480.1258 trillion won, a rise of 3.7579 trillion won. The increase in jeonse deposit loans reached 2.0491 trillion won, marking the largest jump in four months since October last year (2.5205 trillion won).