[Will Interest Rates Rise Again?] ② Even Low-Interest Internet Banks Hesitate Due to Regulatory Pressure

Internet-only banks, which had attracted borrowers with low-interest mortgage loan products, are expected to slow down. Recently, financial authorities have pointed to internet-only banks' mortgage loans as a cause of the surge in household loans. In addition, major commercial banks appear to be taking a cautious stance, with some suspending the sale of '50-year maturity mortgage loan' products that they had competitively offered.

Even Internet Banks Offering Low Rates 'Slow Down'... Adjusting Interest Rates?

According to the Bankers Association disclosure on the 22nd, as of June, the average interest rates for newly issued installment-type mortgage loans by KakaoBank and K Bank were recorded at 4.02?4.14% per annum. This is 0.65 percentage points lower at the upper end and 0.29 percentage points lower at the lower end compared to the average rates of the four major commercial banks (KB Kookmin, Shinhan, Woori, Hana), which ranged from 4.31% to 4.79%.

As a result, the outstanding mortgage loan balances of KakaoBank and K Bank have also increased significantly. KakaoBank's mortgage loan balance in the second quarter was 5.5 trillion KRW, up about 3 trillion KRW from the previous quarter, and K Bank's apartment mortgage loan balance also doubled to 2.4 trillion KRW compared to the end of last year. New loan issuance amounted to 3.5 trillion KRW for KakaoBank and 900 billion KRW for K Bank.

Financial authorities view the expansion of mortgage loans by these internet-only banks as one of the main causes of the recent surge in household loans and are applying pressure. Lee Bok-hyun, Governor of the Financial Supervisory Service, recently stated in a meeting with reporters, "I have a critical view on whether the concentration of mortgage loans aligns with the internet-only banks' policy objective of supplying funds to medium- and low-credit borrowers," and announced plans for on-site inspections.

As such, with the authorities' pressure on household loans intensifying, the internet-only banks' strength of offering 'low interest rates' is likely to be adjusted. A financial industry insider said, "Even during total loan volume regulations, banks ultimately raised interest rates and reduced limits as their means, and now that the authorities have sent signals, it seems inevitable to follow a similar path," adding, "This will inevitably affect customers as well."

In fact, as of the previous day, the variable-rate mortgage loan interest rates of KakaoBank and K Bank ranged from 4.05% to 6.81%, narrowing the gap with the four major commercial banks to 0.12 percentage points at the upper end and 0.25 percentage points at the lower end.

The NH Nonghyup Bank headquarters in Jung-gu, Seoul, on the morning of the 20th, as the bank announced the suspension of sales for 50-year mortgage loan products. Photo by Yonhap News

Mortgage Loans Decrease at Four Major Banks; NH Nonghyup Suspends 50-Year Maturity Loans

The situation is no different for commercial banks. As of the 17th, the outstanding mortgage loan balance of the four major commercial banks was recorded at 417.1972 trillion KRW. This is a decrease of 8.013 billion KRW compared to the end of the previous month (417.9985 trillion KRW).

The reasons for the decline in mortgage loan balances at the four major banks are considered complex. A commercial bank official said, "The real estate market is showing signs of recovery, and with loan interest rates continuing to rise, some borrowers appear to have proactively sold their homes and repaid loans," adding, "Also, a significant portion of loan demand may have shifted to other banks or internet-only banks offering lower interest rates."

The 50-year maturity mortgage loan product, cited alongside internet-only banks as a cause of the increase in household loans, is also facing setbacks. As household loans in the banking sector rose for four consecutive months, including a 6 trillion KRW increase in mortgage loan balances last month, authorities have stepped in to curb this trend. NH Nonghyup Bank has decided to suspend the sale of 50-year maturity mortgage loans starting next month.

A financial industry insider said, "It is true that Nonghyup Bank had recently pursued aggressive household loan business by lowering interest rates," adding, "With authorities identifying internet-only banks and 50-year maturity mortgage loans as causes of loan increases, there is a hurried atmosphere to halt these products."