Rising Jeonse Prices Slow 2nd-Tier Financial Loans
Korea Investment, Hanwha, CK Savings Banks Halt Jeonse Loans
Failing to Find Jeonse During Fall Moving Season Could Turn You into a 'Refugee'
[Asia Economy Reporter Song Seung-seop] Kim In-cheol (37, pseudonym), who lives in a rented house in Dobong-gu, Seoul, is now in a situation where he has to find a new place to live after his landlord notified him last month that they would move back in. His lease expires in November, so he needs to act quickly, but since his current deposit was covered by a loan, he has no spare funds. Last week, he even approached secondary financial institutions but was either rejected or deterred by high interest rates. Kim said, "My jeonse deposit has dropped to the level of a half-jeonse deposit in just two years," adding, "Even after exhausting all my money, it's tight, and I don't know where to get the housing costs from."
It has been confirmed that some savings banks have stopped offering jeonse loan products following commercial banks. As real demand borrowers facing a lending cliff turn to secondary financial institutions, savings banks under total volume regulation pressure appear to be slowing down their lending. There are concerns that households unable to secure sufficient funds amid soaring prices may become 'jeonse refugees.'
According to the industry on the 7th, CK Savings Bank, based in the Gangwon region, has stopped selling its 'General Fund Loan (Jeonse Fund)' product. A CK Savings Bank official explained, "The bank itself is handling apartment interim payment loans, but the available loan limit has been fully used," adding, "For internal management reasons, we are not processing personal loans or mortgage loans either."
CK Savings Bank's jeonse loan product was still listed in the Savings Banks Association disclosure as recently as last month. The disclosure applies to products with new loan amounts exceeding 300 million KRW in the previous month. The average interest rate on loans handled was a relatively low 4.5% (lump-sum repayment) even among secondary financial institutions, and the loan-to-value ratio (LTV) was up to 70%, but it is no longer available.
Korea Investment Savings Bank has stopped selling its rental apartment mortgage loan product, 'Home Jeonse Loan 2.' The fixed interest rate ranged from 3.72% to 8.49% annually, with loan limits from a minimum of 5 million KRW to a maximum of 300 million KRW.
Will Jeonse Loan Inquiries Come...? Product Information Removed, ARS Consultation Halted
Even in places that have not officially announced the suspension of sales, information on jeonse loan products has disappeared. Six savings banks have already removed jeonse loan product information. Hanwha Savings Bank said, "It is difficult to disclose internal reasons, but we have stopped selling jeonse loan products," adding, "Despite high demand, due to risk management and other reasons, we have no plans to resume sales for the time being."
Some institutions are conducting irregular operations rather than a full suspension. One savings bank announced jeonse loans through disclosures as recently as August but has recently stopped providing related product information via ARS. It is difficult to obtain jeonse loans by phone or non-face-to-face methods, and customers must visit a branch located in Jeollanam-do in person.
Currently, financial authorities are considering including jeonse loans in household debt management targets, citing concerns over excessive growth in jeonse loans. Last year, the increase rate of jeonse loans was about 33%, and this year shows a similar pace. Even if jeonse loan regulations are preemptively implemented in some commercial banks, a balloon effect and additional measures targeting secondary financial institutions may follow.
Earlier, financial authorities have consistently urged secondary financial institutions, including savings banks, to manage the increase in household loans since early this year. In April, through household debt management measures, it was decided to introduce provisioning regulations for limit-type loans. This is to strengthen risk management systems and apply consistent regulations. The credit conversion rate, which is the basis for provisioning, will be gradually raised to 40%.
Meanwhile, savings banks must limit their total loan growth rate to within 21% annually.
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