A 3 Trillion Won Big Fish... Banks Hesitant on Dunchon Jugong Final Payment Loans

Regarding the move-in of 'Olympic Park Foreon (Dunchon Jugong),' known as the largest reconstruction project since the era of Dangun, banks are showing a passive attitude toward handling balance payment loans. The financial sector views this project as a major deal with a loan scale reaching 3 trillion won, but given the authorities' focus on household debt management, it is seen as difficult for banks to actively participate.

According to the financial sector on the 12th, the five major domestic commercial banks (KB Kookmin, Shinhan, Hana, Woori, NH Nonghyup) have either decided to handle or are reviewing the handling of balance payment loans for Dunchon Jugong. Led by Kookmin Bank, Hana Bank, Nonghyup Bank, and Shinhan Bank have finalized the supply scale, timing, and interest rates, while Woori Bank is also reviewing these aspects.

By bank, Kookmin Bank will handle balance payment loans with a total limit of 300 billion won. The interest rate is about 4.8% per annum at minimum for a 5-year cycle product. Hana Bank will also handle loans up to 300 billion won, with interest rates set at a minimum of 4.61% per annum for fixed (hybrid) type and 5.01% for variable type. Nonghyup Bank's limit is 200 billion won, with an interest rate of about 4.80% per annum for a 5-year cycle product.

Woori Bank is reportedly reviewing a plan to supply balance payment loans with a total limit of 50 billion won and an interest rate around 4.8%. They plan to consider increasing the limit next year. Shinhan Bank has set a limit of 100 billion won and an interest rate at the level of the 5-year financial bond plus 1.5 percentage points but has postponed the supply timing to next year. The total balance payment loan limit supplied by these five banks to Dunchon Jugong amounts to approximately 950 billion won.

The Dunchon Jugong project, with over 10,000 move-in households, is typically considered a project where each bank would actively compete in sales. However, the limit of 950 billion won offered by the five banks is relatively small compared to the total balance payment loan scale of 3 trillion won, and the proposed interest rates are also not attractive. Previously, Saemaeul Geumgo and others who started balance payment loans offered interest rates in the low 4% range.

The reason for the banks' passive response lies in the financial authorities' and banks' household debt management. For example, Woori Bank, which decided to handle balance payment loans within a 50 billion won limit, has already exceeded its total household loan target (115.4 trillion won) as of August. Shinhan Bank, which plans to handle balance payment loans starting next year, has long exceeded its target (120.5 trillion won).

A representative from a commercial bank said, "Since the number of households reaches 10,000 and there are many high-quality customers who can bear the sale price, under normal circumstances, each bank would fiercely compete for this project. However, due to the total household debt management, it seems each bank has set the limit at a level that only covers the repayment of interim payment loans they have already issued. The actual impact on the total household debt is expected to be minimal."

Another bank official stated, "Since the move-in period will take place from the 27th through next year, it appears they are participating at least formally. Increasing the limit is difficult at present, but depending on circumstances, there may be cases of limit increases in the new year."