With the financial authorities tightening household debt management, the bar for mortgage loan approvals is rising earlier than in previous years. With the possibility of additional government lending curbs next month, the burden will likely grow for homebuyers who must settle the remaining balance in the second half.
According to the banking sector on the 23rd, KB Kookmin Bank plans to restrict new applications for mortgage credit insurance (MCI) and mortgage credit guarantee (MCG) starting on the 26th. MCG is insurance taken out together with a mortgage loan; without it, borrowing is only allowed on the amount excluding the small-amount jeonse deposit, effectively reducing the loan limit.
The small-amount jeonse deposit is 55 million won in Seoul and 48 million won in the greater Seoul area. For dwellings under 1.5 billion won, borrowing is capped at up to 600 million won, making it a significant sum. Among the five major commercial banks, NH NongHyup Bank first restricted loans requiring MCI and MCG on the 11th.
NongHyup Bank has already exceeded its management target for growth in household loans compared with the end of last year and has halted loans via loan solicitors. For solicitor-channeled loans, mutual finance institutions such as the Korean Federation of Community Credit Cooperatives (KFCC) and agricultural and credit cooperatives have blocked them since the start of the year, and Busan and Kyongnam banks have suspended mortgage loans in the greater Seoul area. Commercial banks also appear likely to hit their limits for solicitor-channeled loans soon.
Banks are trimming the loan limit faster than in previous years. Last year, NH NongHyup Bank restricted loans requiring MCI and MCG in June, and Shinhan Bank did so starting in August. KB Kookmin Bank halted them in November last year. Solicitor-channeled loans were also halted sequentially from August to November last year.
If KB Kookmin Bank follows NH NongHyup Bank in restricting loans that require MCI, lending could gravitate to other commercial banks, accelerating the timeline for suspensions. A banking industry official said, "This year, banks effectively have no additional room for loan growth by institution, so lending restrictions began much earlier. Depending on additional lending control policies, loans in the second half could decrease further."