"If It's Not Urgent, Hold Out for a Month"... Lending Freeze Expected to Ease Next Year [Financial Microscope]

Banks Tighten Mortgage Lending to Manage Household Loans
Urgent Borrowers Turn to Secondary Financial Institutions Despite Higher Interest Rates
Situation Expected to Improve Starting in January

People struggling with bank loans. AI image

As major banks have significantly raised the threshold for household loans to manage their total lending volume, genuine borrowers are facing difficulties. With commercial banks effectively suspending new mortgage loans scheduled for this year, more people are turning to secondary financial institutions, which generally offer higher interest rates. Experts advise that since the situation is likely to improve starting next month, unless it is an emergency, borrowers should try to hold out for another month.

Banks Tighten Mortgage Lending to Control Household Loans

According to the banking sector on December 3, KB Kookmin Bank is restricting new applications for mortgage loans intended for home purchases and certain unsecured loans scheduled for execution this year. The bank has also suspended refinancing loans (mortgage, jeonse, and unsecured loans) from other banks to KB Kookmin Bank, as well as its non-face-to-face unsecured loan products, 'KB Star Credit Loan I and II.' While mortgage loans for living stabilization funds and jeonse loans are still available, they only account for a small portion of overall demand.

Hana Bank also began restricting new applications for mortgage and jeonse loans scheduled for this year starting November 25. Woori Bank has limited the monthly cap for real estate financial products, such as mortgage loans, at each branch to 1 billion won per month.

The reason banks are closing their loan windows is that they have significantly exceeded the household loan targets set by financial authorities for this year. As of November 20, the increase in household loans at the four major banks-KB Kookmin, Shinhan, Hana, and Woori-stood at 7.8953 trillion won, which is 33% above the target of 5.9493 trillion won. When announcing the real estate measures on June 27, financial authorities instructed banks to halve their lending targets for the second half of the year compared to initial plans, but banks have failed to comply. If banks exceed their targets, they will face penalties such as reduced lending limits next year.

As major banks make it harder to obtain mortgages, genuine homebuyers who need to secure final payments for apartment purchases are struggling. An office worker living in Seoul, identified as Mr. A, recently tried to get a mortgage loan from a bank but was rejected. Mr. A explained, "I urgently needed a loan, so I went to a bank near my home, but they told me the loans were already closed. I also heard that getting a loan this year would be difficult."

Urgent Borrowers Turn to Higher-Interest Secondary Lenders

With loans from commercial banks becoming harder to obtain, demand has increased for loans from internet banks and secondary financial institutions, even at higher interest rates. However, it is not easy to get loans from these lenders either. For example, KakaoBank stopped accepting new mortgage loan applications after the real estate measures announced on October 15, but resumed applications on November 18, resulting in a surge of applicants. Applications for mortgage loans open at 6 a.m. each day, and among genuine borrowers, a "first-come, first-served" rush has emerged. It is reported that the daily loan limit is exhausted almost immediately after the 6 a.m. opening.

Insurance companies and mutual finance institutions have also raised their lending thresholds. Samsung Fire & Marine Insurance has suspended non-face-to-face mortgage loans scheduled for this year, while KB Insurance has also finished accepting new mortgage loan applications for the year. Suhyup Bank and the National Credit Union Federation of Korea have completely suspended new household loans to non-members. People in urgent need of funds are even resorting to high-interest loans such as card loans.

The financial sector expects the loan crunch to continue throughout December but anticipates improvement starting next month. An official from a commercial bank explained, "Due to the total volume management of household loans, it has become a recurring trend for loans to be difficult to obtain at the end of every year. If you need a loan, it is better to aim for January."

Lee Chanjin, Governor of the Financial Supervisory Service, also predicted that the loan crunch will ease starting next month. At a press briefing on December 1, he said, "We are closely monitoring the current suspension of loans in the market," and added, "There is no need to worry next year." He emphasized, "Many commercial banks have already exceeded their lending limits, but since these limits only apply until the end of the year, I do not expect a significant impact next year."