[Exclusive] Saemaeul Geumgo to Fully Suspend Household Loans from the 29th... Regulatory 'Balloon Effect'

Sharp Increase in Household Loan Volume in November... Causes Exceeding Financial Authorities' Targets
Complete Suspension of Household Loan Handling Including Four Types of Home Purchase and Broker Loans

[Asia Economy Reporter Kim Jin-ho] Saemaeul Geumgo will completely halt the handling of household loans for home purchase purposes starting from the 29th. This is mainly analyzed as the so-called 'balloon effect' caused by the tightening of loans in the banking sector due to total volume regulations. Borrowers who had planned to take out loans by the end of the year are now under urgent pressure.

According to the financial sector on the 26th, Saemaeul Geumgo will temporarily suspend the sale of four types of household loans for home purchase purposes at all branches starting from the 29th. The affected products include ▲ Household Home Purchase Fund Loan ▲ Pre-sale Housing Move-in Balance Loan ▲ MCI Household Home Purchase Fund Loan ▲ MCI Pre-sale Housing Move-in Balance Loan. MCI loans typically apply to apartments, while MCG loans apply to multi-family and row houses.

This measure will apply to new loans from the 29th onward. The end date will be announced separately. However, to minimize confusion, consultations and data entries made before the implementation date will still be executable.

Saemaeul Geumgo also plans to stop household loans through loan brokerage firms. They will restrict commission payments for household loans made through loan brokerage firms. The targets include all household loans secured by housing, such as move-in balance loans, home purchase loans, and living stabilization funds.

If the brokerage date (the date the loan broker submits the loan application to the Geumgo) is on or after the 29th, no commission will be paid. Strong measures such as suspension of brokerage firm operations will be enforced in case of violations. A financial sector official explained, "This is practically a declaration that Saemaeul Geumgo is completely stopping the handling of household loans."

The reason Saemaeul Geumgo took this strong step to halt household loans is largely due to the high-intensity total volume regulations by financial authorities, which caused demand that could not pass the bank threshold to concentrate here. In fact, on major real estate communities, it is easy to find reviews from borrowers who, unable to pass the bank threshold, used second-tier financial institutions like Saemaeul Geumgo.

Another cause is that Saemaeul Geumgo's loan interest rates are not significantly different from bank rates. According to the 'Weighted Average Interest Rate of Financial Institutions in October' announced by the Bank of Korea on the same day, the overall household loan interest rate at deposit banks was 3.46% per annum, which is not much different from Saemaeul Geumgo's 3.87%. Due to this, in the second half of this year when banks successively closed loan windows, Saemaeul Geumgo's loan balance surged from 154.744 trillion KRW at the end of June to 164.094 trillion KRW at the end of September.

Financial authorities tried to preemptively reduce the proportion of secured loans and change portfolios to prevent the 'balloon effect' toward second-tier financial institutions like Saemaeul Geumgo, and required weekly submission of household loan increase amounts, but it is reported that the effect was minimal. A financial sector official said, "Due to the balloon effect caused by loan restrictions at other financial institutions, Saemaeul Geumgo's household loans increased sharply especially in November," adding, "It is understood that this exceeded the targets set by the financial authorities."