The cost of funds index (COFIX), which is the standard for determining the variable interest rates for dwellings secured loans, has declined for two consecutive months, and as banks gradually lower the lending thresholds they have raised, concerns about a surge in household loans are resurfacing. However, as uncertainties in the real estate market, which is the main cause of the surge in household loans, are increasing, there are predictions that the growth rate may not be significant.
According to the Banking Association on the 18th, the COFIX announced on the 16th, based on the new handling amounts for November, is 3.35%, down 0.02 percentage points from the previous month. Earlier, the new COFIX fell from 3.40% in September to 3.37% in October. Consequently, Kookmin Bank and Woori Bank lowered their variable-rate dwellings secured loan rates by 0.02 percentage points starting on the 17th. Other commercial banks' variable rates for dwellings secured loans are also expected to decrease slightly.
Financial institutions are gradually lowering the thresholds for household loans. Shinhan Bank has raised the limit for dwellings secured loans for living stability funds from 100 million won to 200 million won starting on the 17th, and Hana Bank has also resumed sales of non-face-to-face dwellings secured loans and jeonse loans starting from the 12th, but only for loans executed next year. Shinhan Bank has also relaxed restrictions on jeonse loans, deciding to resume jeonse loans for newly unsold properties that are not yet registered and for individuals holding one dwelling.
Amid the impeachment crisis, there are concerns that the lowered lending threshold could exacerbate the issue of increasing household debt, but experts suggest that the impact may be limited. The main reason is that the growth of dwellings secured loans, which account for more than 60-70% of household debt, may slow down.
Recently, the real estate market has been stagnant, and the apartment sales price index for November has returned the increase of 0.08% from the previous month and remained flat. Due to the learning effect caused by the drastic fluctuations in real estate policies depending on the administration, alongside the recent political uncertainties, buyers have more reasons to postpone transactions than they did in November. Moreover, many believe that the impeachment crisis will expand the wait-and-see stance in the sales market.
Koh Jun-seok, a professor at Yonsei University's Sangnam Business School, said, “While the interest rates for dwellings secured loans have decreased, there is still a temperature difference in the market. Since the reduction in interest rates is still insufficient for non-homeowners to secure their own homes, it does not seem necessary to worry that dwellings secured loans will increase significantly and that household loans will surge.”
In addition to concerns about falling housing prices, there is an opinion that excessive concern about household loans may not be desirable given the current situation where the domestic economy is sluggish. Cho Yong-moo, a research fellow at LG Economic Research Institute, also noted, “In a situation where there is serious concern about the domestic economy, discussing household liabilities based on the movements of some banks seems premature.”
However, as the current crisis is rooted in household liabilities, there are also points made that it is necessary to reduce the absolute size of liabilities. Kim Sang-bong, a professor of economics at Hansung University, stated, “Although the rate of increase in household liabilities, such as dwellings secured loans, may slow down due to the cooling real estate market, it will not stop increasing.” He advised, “When housing prices begin to fall, the crisis will also be transferred to banks, so it is important to reduce the risks themselves, or the absolute size of liabilities.”