Major commercial banks are lowering loan thresholds to welcome the new year. Although loan regulations were tightened last year to manage the rapidly rising household debt, new total loan limits have been imposed with the start of the year. However, the financial authorities are expected to maintain their regulatory stance, as they have announced a 'penalty' that will reduce the loan volume this year by the amount exceeding the household loan increase target for banks that surpassed the goal last year.
According to the financial sector on the 3rd, commercial banks are lifting restrictions on mortgage insurance for housing mortgage loans (HML), increasing HML limits, and resuming non-face-to-face loans one after another. KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup Banks are all resuming the application of Mortgage Credit Insurance (MCI) and new HML Mortgage Credit Guarantee (MCG). As a result, the HML limit in the metropolitan area will increase by about 55 million KRW starting this year. Mortgage insurance is insurance subscribed to when executing an HML; without this insurance, loans can only be made for amounts excluding small rental deposits, effectively reducing the loan limit.
Additionally, the HML limit for living stabilization funds will also increase. KB Kookmin Bank has abolished the 200 million KRW limit on HML for living stabilization funds. Shinhan Bank and Woori Bank have raised the limit from 100 million KRW to 200 million KRW. Hana Bank and NH Nonghyup Bank still limit the HML for living stabilization funds to 100 million KRW only for multi-homeowners. KB Kookmin and Shinhan Banks have lifted restrictions nationwide, while Woori Bank and Nonghyup Bank still restrict HML in the metropolitan area. Among these, only Hana Bank allows HML for home purchase purposes for homeowners.
Restrictions on jeonse (key money deposit) loans are also being eased. KB Kookmin Bank has decided to lift the loan limit restricted within the range of increased rental deposits. The restriction on new jeonse loans for refinancing at other banks will also be lifted. Shinhan Bank and Woori Bank will remove regulations that limited jeonse loan issuance to one-homeowners.
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Previously, only Hana Bank allowed jeonse loans for newly supplied housing, but starting this year, Shinhan Bank and Nonghyup Bank will also offer them.
Loans through non-face-to-face channels are also mostly resuming. Hana Bank resumed non-face-to-face HML and jeonse loan sales starting this month. Shinhan Bank has lifted restrictions on non-face-to-face household loans. Woori Bank has resumed non-face-to-face HML and jeonse loans but still restricts non-face-to-face unsecured loans.
The reason commercial banks are resuming loans one after another is that new total household loan limits have been set for each bank with the start of the year, creating loan capacity.
However, since the financial authorities have announced that they will apply a 'penalty' to banks that exceeded last year's household loan targets by reducing this year's loan volume by the excess amount, the household debt management stance is expected to continue this year. It has been revealed that three major commercial banks?Woori, Shinhan, and Hana?one internet bank, and some regional banks exceeded their household loan targets last year. This is the first time the financial authorities have applied such a penalty to banks based on the management targets they set.
Although the financial authorities have indicated that they will continue their regulatory stance, loan demand is still expected to remain high.
A representative from a commercial bank said, "There have already been many inquiries about loans to be executed in the new year since mid-last year," adding, "Especially since the third phase of the Debt Service Ratio (DSR) stress test regulation will be implemented from July this year, and prepayment penalties will be reduced by nearly half starting mid-this month, loan demand is expected to surge in the first half of the year."
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