Shinhan Bank decided to restrict applications for home mortgage loans whose execution date is within a month. Following the June 27 measures that capped the Seoul metropolitan area mortgage limit at 600 million won, the Sept. 7 measures that strengthened the loan-to-value (LTV) ratio for regulated areas to 40% came one after another, and as loan regulations changed by the moment, the bank aims to lengthen the review period to minimize errors. It also expects the effect of strengthening the management of home mortgage loans. The government ordered that the target for total household loan growth in the second half of this year be cut in half.
According to the financial sector on the 16th, Shinhan Bank changed its internal guidelines from early this month so that approvals for home mortgage loans and jeonse loans are granted only if they are filed at least 20 business days in advance, and reflected this in its IT system. Although the filing window for home mortgage loans and jeonse loans varies by bank, it is common to apply at least two weeks to a month before the execution date.
A Shinhan Bank official said, "Because household loan regulations keep changing, these guidelines were prepared in case errors occur when loan reviews are conducted close to the (execution date)." It is seen as a measure to minimize errors or mistakes arising when front-line branches fail to reflect the frequent changes not only in eligibility but also in loanable amounts amid repeated loan regulations.
As loan filing and screening become more stringent, the threshold for borrowing will rise further. From the banks' perspective, there is the advantage that managing the total volume of loans becomes easier. When it announced the June 27 measures, the government instructed the banking sector to reduce by about half the target for total household loan growth in the second half. In the case of the five major banks, they are in a situation where they must cut their household loan growth targets by about 3.6 trillion won from the previous level.
Since last month, Shinhan Bank has suspended the acceptance of home mortgage and jeonse loan applications through loan brokers, and decided not to apply mortgage credit insurance (MCI) to new home mortgages through the end of October. MCI is insurance taken out simultaneously with a home mortgage; without this insurance, borrowers can only get loans on the amount excluding small tenant deposits, thereby reducing the loan limit. The bank also decided to expand the unit from the Seoul metropolitan area to nationwide through October and restrict the handling of conditional jeonse loans.
Home mortgage loans at the five major banks kept rising through last month but turned to a decline this month under the impact of regulations. As of the 11th, the outstanding balance of home mortgages at the five major banks (607.619 trillion won) fell by 52.4 billion won compared with the end of August (607.6714 trillion won). Home mortgages have posted monthly increases since they fell by 449.4 billion won from the previous month in March last year.