Banks Begin Revising Jeonse Loans... Raising Bar for Other Loans as Well

Introduction of Maximum Limit for Jeonse Renewal at 17 Banks
Jeonse Application Difficult for Those Who Have Paid the Balance

Photo by Hyunmin Kim kimhyun81@

[Asia Economy Reporter Kiho Sung] From the end of this month, the maximum limit for jeonse loans available when renewing a global lease contract at banks will be restricted to the amount by which the jeonse price has increased. Additionally, those owning more than one house will no longer be able to apply for non-face-to-face jeonse loans, and it will become difficult to apply for jeonse loans after paying the balance.

According to the financial sector on the 27th, 17 banks have agreed to set the maximum loan limit available at contract renewal to the increased amount of the rental deposit. For example, if the jeonse price rises by 100 million KRW at renewal, the loan can only be taken within that 100 million KRW.

Also, the period during which one can apply for a loan when signing a new global lease contract will be shortened. Previously, loan applications were possible within three months from the earlier date between the move-in date and the resident registration transfer date. However, going forward, loan applications will only be accepted before the balance payment date stated in the contract.

Owners of more than one house are prohibited from non-face-to-face loans and must visit the bank counter in person to obtain a loan. However, K-Bank, an internet-only bank without physical branches, will exceptionally continue to offer non-face-to-face jeonse loans to one-house owners.

Major commercial banks such as KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup began implementing these measures from the 27th. Foreign banks, regional banks, and internet banks are expected to implement them within this month.

With additional regulatory proposals emerging just one day after the Financial Services Commission unveiled new household debt measures, the loan market is expected to freeze further. The jeonse loans were not included in the strengthened Debt Service Ratio (DSR) regulations announced by financial authorities the previous day. However, from next year, jeonse loans will be included in the total household loan volume management.

Therefore, as ‘last-minute demand’ for jeonse loans is expected until the end of this year, banks are believed to have independently devised stricter management plans.

The banking sector is also raising the bar for other loans such as mortgage loans and credit loans.

Standard Chartered First Bank will completely suspend new sales of its mortgage loan product ‘First Home Loan’ starting from the 29th. Nonghyup Bank will also drastically reduce the limits for credit loans and overdraft accounts to 20 million KRW from the 1st of next month until the end of the year.