Toss Bank Prepares to Launch Mortgages... Will Competition Among the Three Internet-Only Banks Intensify?

Toss Bank to Launch Mortgage Loans This Year
Competition Among Three Internet-Only Banks to Intensify
Challenges Ahead in Strengthening Competitiveness Amid Household Lending Regulations

With Toss Bank set to launch its mortgage loan product this year, competition among the three internet-only banks in the mortgage sector is expected to intensify. However, some predict that aggressive business expansion will not be as easy as in the past, given that financial authorities are maintaining a regulatory stance on household lending.

According to the financial industry on January 14, Toss Bank is currently focused on preparing its mortgage loan product, aiming for a launch within the first half of the year. Since internet-only banks are introducing mortgage loans about five years after their launch, it is essential for Toss Bank, which started operations in 2021, to add mortgages to its portfolio. Market expectations are high, especially given Toss Bank’s history of introducing innovative financial products. For example, when it launched its Jeonse and monthly rent loan products, Toss Bank received positive reviews for incorporating real-time notifications of changes in the certified copy of the real estate register.

Given the nature of mortgage loans, internet-only banks have so far expanded their business by leveraging competitive interest rates. KakaoBank, in particular, has become so popular among financial consumers that terms like "interest rate hotspot" and "mortgage loan open run" have emerged. According to disclosures by the Korea Federation of Banks, the average interest rate for KakaoBank’s mortgage loans (based on amortized, newly issued loans) stands at 4.02%, which is about 0.38 to 0.5 percentage points lower than the five major banks (KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup). K Bank’s apartment mortgage loans are also following closely behind KakaoBank in terms of competitive rates. K Bank’s average interest rate is 4.12%, about 0.28 to 0.4 percentage points lower than the five major banks.

Thanks to this interest rate competitiveness, internet-only banks have continued to see growth in mortgage loans despite household lending regulations. As of the third quarter of last year, the outstanding balance of KakaoBank’s mortgage loans (excluding Jeonse and monthly rent loans) increased by 876 billion won year-on-year to reach 13.415 trillion won. K Bank’s outstanding mortgage loan balance also grew by 725.7 billion won year-on-year to 8.5536 trillion won as of the third quarter.

For this reason, there are predictions in the financial sector that it will not be easy for Toss Bank, as a latecomer, to enhance its competitiveness. Since KakaoBank introduced mortgage loans in 2022, non-face-to-face mortgages have become established in the banking sector, and convenience has greatly improved. Moreover, due to the government’s continued regulatory stance on household lending, it is difficult to expand business by offering the "low interest rates" most desired by mortgage loan customers. A banking industry official stated, "Banks are taking a conservative approach to mortgage loan business this year as well," adding, "It will be difficult to aggressively attract customers with low interest rates, as banks will be wary of the authorities’ scrutiny."