As the government lowered the mortgage loan limit in regulated areas, attention is shifting to second-tier lenders such as mutual finance, where borrowers can get slightly larger loans. Unlike banks, where the debt service ratio (DSR) cap is 40%, second-tier lenders allow loans up to a DSR of 50%. But Saemaul Geumgo has already exceeded this year's household loan growth target, and others are also preemptively restricting household lending, suggesting it will not be easy to borrow money.
According to the Bank of Korea's financial statistics system on the 21st, Saemaul Geumgo's household loan balance at the end of August was 63.3187 trillion won, up about 5.05% from the end of last year (60.2717 trillion won). Earlier, financial authorities instructed the National Federation of Saemaul Geumgo to keep this year's household loan growth within 3.8%. The target was exceeded in less than a year.
Saemaul Geumgo's household loan growth continued through September. Last month, the increase in Saemaul Geumgo household loans was 700 billion won, which is about 60% of the increase in household loans across all financial sectors (1.1 trillion won). A financial industry official said, "As first-tier lenders such as banks tightened household loan management and it became harder to borrow, more customers turned to mutual finance."
During the same period, credit unions saw household loans rise from 31.3086 trillion won to 31.9126 trillion won, up 1.93%. While that has not yet reached the target recommended by financial authorities (growth of 2.8%–3.8%), the rate is relatively high compared with the average household loan growth (0.9%) among other mutual finance sectors such as agricultural and fisheries cooperatives and forestry cooperatives. Credit unions are currently restricting new mortgage lending for unions in Seoul.
The concentration of household loan demand in mutual finance appears not only to reflect banks raising the bar but also to be aimed at increasing loan limits even slightly. For example, a financial consumer with an annual salary of 50 million won taking out a 30-year mortgage at a bank with an annual interest rate of 4% and a stress rate (additional rate) of 3%, on an equal principal and interest repayment schedule, could borrow only up to 250 million won at a bank (DSR 40%), but could borrow up to 300 million won at a second-tier lender (DSR 50%).
A financial industry official said, "While the loan limit difference is large when the same interest rate is applied, even savings banks have minimum mortgage rates in the 6%–7% range, so there may be no difference in loan limits and this needs to be weighed carefully." DSR refers to the share of principal and interest repayment in annual income; the higher the loan rate, the greater the interest and the smaller the loan limit.