[Financial Microscope] Mortgage Loans Shrink, Corporate Lending Rises...Capital Flows Realign Under Productive Finance Policy

Mortgage, jeonse, and group loans all decline together
Impact of tighter regulations clearly visible
Seasonal funding demand at the start of the year
Corporate loans show an upward trend

This year, the balance of mortgage loans at commercial banks has turned to a decline for the first time in about two years, shrinking by nearly 1.5 trillion won. This is due to stronger regulations and higher lending rates. Jeonse (lump-sum deposit) loans have also fallen for five consecutive months, and group loans for new apartment projects have been declining for 16 straight months. In contrast, corporate lending continued to grow on the back of seasonal funding demand at the start of the year and the government’s policy stance favoring productive finance.

According to the five major banks - KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup - as of the end of January 2026, their combined outstanding balance of mortgage loans stood at 610.1245 trillion won. This is a decrease of 1.4836 trillion won from the end of December 2025 (611.6081 trillion won). It is the first time in 1 year and 10 months, since March 2024, that the combined mortgage balance at the five major banks has fallen compared with the previous month. Jeonse loans also decreased by 184.9 billion won to 122.4649 trillion won, marking a decline for the fifth consecutive month since September 2025. Group loans linked to new housing presales fell to 149.8049 trillion won, down 2.4143 trillion won from the end of last year, extending their decline for the 16th straight month since October 2024.

This trend appears to be largely driven by the government’s strong stance on tightening real estate lending. Last year, the government successively announced the so-called “6.27 Measures,” which capped mortgage loan limits in the Seoul metropolitan area at a maximum of 600 million won, and the “10.15 Measures,” which designated 12 areas in Seoul and Gyeonggi Province as regulated zones, thereby raising the bar for loan access. In these regulated areas, the loan-to-value (LTV) ratio was cut from 70% to 40%, sharply reducing borrowers’ capacity to take out loans. In addition, as the financial authorities raised the minimum risk weight (RW) applied to mortgage loans, the burden on financial institutions to manage their capital ratios has increased in step with any expansion in real estate lending.

Corporate loans, on the other hand, are on an upward trajectory. While household lending has been declining, the outstanding balance of loans to large corporations rose from 170.2992 trillion won in December 2025 to 171.4476 trillion won in January 2026, an increase of about 1.1484 trillion won. This is analyzed as the combined result of the financial authorities maintaining a productive finance policy that eases the burden on financial institutions for corporate lending, and seasonal factors such as increased funding demand by companies at the beginning of the year.

Within the financial sector, there is a widespread view that, for the time being, household loans will continue to be managed conservatively, while corporate lending will keep expanding. An official at a financial institution said, “Due to regulatory effects, it will be difficult to expect a rapid recovery in real estate-related loans in the near term,” adding, “At least through the first quarter of this year, banks are likely to take a somewhat conservative approach to household lending.” The longer-term trend is also tilted toward strengthening corporate finance. At a 2025 conference call held on January 30, Hana Financial Group Chief Financial Officer (CFO) Park Jongmu said, “We expect that in the next two to three years, the winners and losers will be determined by which industries we have supported through our own investments and loans,” and added, “At the group level, we plan to push forward loans and proprietary investments related to productive finance through a single platform led by a dedicated task force (TF).”