Some commercial banks where household loans have risen quickly are considering temporarily suspending group loans (final payment loans) in the second half. Mortgage loan demand surged in the first half, led by final payment loans, prompting a move to slow the pace.
According to the financial sector on the 22nd, major commercial banks are considering temporarily suspending final payment loans in the second half after monitoring the pace of growth in household loans. Some banks plan to operate as conservatively as possible even if they continue to offer final payment loans. That is because the recent increase in mortgage loans has been driven by group loans such as final payment loans, leading to a sharp rise in household loans.
Group loans are extended collectively to future residents of pre-sale apartments or rebuilt apartments. They are divided into interim payment loans taken at the time of pre-sale and final payment loans applied for at the time of move-in.
Some banks, as their outstanding loan balance of household loans has exceeded the targets set at the start of the year, plan to soon decide on a temporary suspension of final payment loans. Banks that exceed their targets at year-end will face disadvantages when new targets for increases in household loans are set next year.
Because final payment loans target large-scale business sites, restricting them makes it easier to reduce the total volume of loans. The banking sector handled group loans conservatively in the second half of last year and saw an overall decline in mortgage loans in the first quarter of this year. However, demand for final payment loans that grew early in the year was reflected in the second quarter, leading to an increase in mortgage loans.
According to the financial sector, the outstanding mortgage loan balance at the five major banks (KB Kookmin, Shinhan, Hana, Woori, NH Nonghyup Bank) stood at 546.3051 trillion won as of the 18th of this month, up 4.521 trillion won from two months earlier. A commercial bank official said, "As contracts for final payment loans for large apartment complexes in the greater Seoul area were executed in the second quarter, mortgage loans increased."
Banks expect the increase in final payment loans to slow somewhat in the second half. However, with mutual finance institutions having halted group loans, they worry that loan demand will flow into commercial banks. Unit Nonghyup branches, the Korean Federation of Community Credit Cooperatives (KFCC), and credit unions have temporarily suspended group loans to moderate the pace of household loans.
If group loans are suspended, borrowers set to move into apartments in the second half face a potential loan cliff. At some pre-sale complexes, more borrowers are delaying move-in because they cannot obtain final payment loans. According to the Korea Housing Institute, the nationwide move-in rate for apartment complexes in April was 55.8%. The biggest reason for not moving in was failure to secure final payment loans (40.8%).
A financial sector official said, "I understand the financial authorities are also considering measures to prevent harm to end users."