Ahead of the implementation of the 3rd stage stress debt service ratio (DSR) regulation on July 1, major banks' household lending management policies are diverging. KB Kookmin, Woori, and NH NongHyup Bank are early suppressing loan demand by raising interest rates or closing loan recruitment early. In contrast, Shinhan Bank and Hana Bank are cautiously targeting the final demand by increasing the loan limits. They have adopted a more reserved approach since lowering loan interest rates could draw the attention of financial authorities.
On the 5th, according to the financial sector, Kookmin Bank raised the lower interest rate for non-face-to-face mortgage loans by 0.17 percentage points from the previous day. This product, which has a lower interest rate than the mortgages handled at Kookmin Bank's offline branches, has experienced an 'open run' on the application. Kookmin Bank adjusted the interest rate to manage loan balances so they do not increase significantly. Woori Bank and NongHyup Bank are also raising their lending thresholds. Woori Bank increased its mortgage interest rate by 0.06 percentage points starting from the 2nd. NongHyup Bank will limit mortgages for homeowners in the metropolitan area starting on the 9th.
While loan conditions are becoming stricter on one side, they are loosening on the other. Shinhan Bank and Hana Bank have increased their loan limits. Shinhan Bank extended the mortgage maturity from 30 years to 40 years starting from the previous day. When the loan maturity is extended, the annual repayment of principal and interest decreases. As the annual repayment amount decreases, the DSR also decreases, allowing for more borrowing within the DSR regulation (40%). Hana Bank also increased the limit for its non-face-to-face mortgage product from 500 million won to 1 billion won on the 29th of last month.
The reason for the differing lending behaviors among banks is that their operational capabilities differ ahead of the implementation of the 3rd stage stress DSR. Kookmin, Woori, and NongHyup banks are wary of a rush in final demand for loans. Once the 3rd stage stress DSR regulation is enforced in July, the individual loan limits will decrease. This situation has led to a phenomenon where people are trying to secure loans in advance before the limits decrease. The household loan balance of the five major banks increased by 4.9946 trillion won in May alone.
In contrast, Shinhan Bank and Hana Bank have determined that it is acceptable to increase loans. The household loan balances of the two banks this year are reported to have not increased significantly compared to other banks. Moreover, there are fewer large-scale allocations this year compared to previous years, which has also helped secure their operational capabilities. As other banks are imposing loan restrictions while the demand for loans surges ahead of the limit regulations, they have decided to loosen the limits and target the market.
However, there is no aggressive sales strategy to attract final demand by lowering interest rates. With financial authorities strictly managing the increase in household loans, any bank that unilaterally lowers rates could be branded as a culprit behind the increase in household loans. Considering this, some banks are increasing sales by being cautious and using non-interest means without touching the rates. A relationship manager at a commercial bank noted, "When consumers choose bank loans, the most significant consideration is the interest. It is difficult to lower rates hastily under the current management of financial authorities, so we are looking to increase sales through alternatives, such as raising limits."