KB Kookmin Tightens Loans Further... Real Demand Borrowers 'Anxious' in Loan Freeze Season

[Asia Economy Reporter Park Sun-mi] As KB Kookmin Bank takes additional measures to significantly reduce the limits on mortgage loans, jeonse deposit loans, and group loans, the likelihood of other commercial banks imposing further loan restrictions by the end of the year has increased.

According to the banking sector on the 24th, KB Kookmin Bank will temporarily reduce the limits on mortgage loans, jeonse deposit loans, and group loans from the 29th as part of total household loan volume management. First, the limit on jeonse deposit loans will be reduced to 'within the range of the increased tenant deposit (jeonse price)'. Previously, loans were possible up to 80% of the tenant deposit, but from the 29th, the maximum limit will be restricted to the amount of the increase in the tenant deposit.

The collateral criteria for move-in balance loans among group loans will also change from the existing KB market price or appraisal value to the lowest amount among the sale price, KB market price, and appraisal value. It is highly likely that the sale price will become the standard, so the limit on balance loans is expected to be significantly reduced.

For mortgage loans, subscription to Mortgage Credit Insurance (MCI) and Mortgage Credit Guarantee (MCG) will also be restricted. MCI and MCG are insurances subscribed simultaneously with mortgage loans; borrowers with these insurances can receive loans up to the LTV, but without insurance, loans are only possible for the amount excluding small tenant deposits. It is also prohibited to refinance loans from other banks to KB Kookmin Bank loans with lower interest rates across unsecured loans, jeonse deposit loans, and mortgage loans.

This measure by KB Kookmin Bank follows the reduction of preferential interest rates on mortgage and jeonse loans by 0.15 percentage points each since the 16th, and the tightening of loan conditions by adjusting the Debt Service Ratio (DSR) for non-regulated areas from the current 100-120% to 70%, and the DSR ratio for living stabilization funds within jeonse loans from 'within 100%' to 'within 70%'.

The impact of KB Kookmin Bank's loan tightening is expected to ripple through other banks as well. This year, financial authorities have ordered commercial banks to strengthen total loan volume management to maintain household loan growth rates at around 5-6%, but when loans are reduced in one area, a balloon effect occurs where loans increase elsewhere, creating a chain reaction.

Although more than three months remain until the end of the year, the household loan growth rate of the five major commercial banks has already approached the target of 5-6% set by the authorities. The household loan balance of the five major commercial banks exceeded 701.5 trillion won, marking a 4.69% increase compared to the end of last year. NH Nonghyup Bank has completely stopped new mortgage loans after exceeding 7%, and Hana Bank and KB Kookmin Bank have responded to surpassing 5% and 4%, respectively, by raising loan interest rates and reducing limits. Shinhan Bank and Woori Bank are still below 4%, at 2.8% and 3.9% respectively, but due to the balloon effect likely caused by KB Kookmin Bank's loan tightening, the situation is being closely monitored.