Kim, a person surnamed Kim (33), who must pay the remaining balance for dwellings purchase at the end of Aug., recently received a notice of rejection for a loan application filed with an insurer. The loan limit was exhausted as applications suddenly surged, it said. With the balance due date approaching, Kim is looking for another financial institution.
With an unprecedented "loan cliff" expected in the second half of this year, loan rejections are already occurring one after another. Mortgage Credit Insurance (MCI) that had been available through last week is being blocked, or loans are being canceled because the limit filled up even for those who applied early.
According to the financial industry on the 30th, the financial authorities have recently been holding weekly meetings to review the status of household loans. This year, they set the household loan growth rate target at 1.5%, less than half of the nominal growth rate outlook, and are strictly controlling the total volume. In the banking sector, they are even reviewing reducing the total outstanding balance of mortgage loan for the second half.
Hana Bank will suspend MCI and Mortgage Credit Guarantee (MCG) loans starting on the 1st of next month. MCI and MCG are insurance and guarantees purchased along with a mortgage loan; without them, only the amount excluding small jeonse deposits can be borrowed, cutting the loan limit by about 55 million won in Seoul. Following NH NongHyup Bank earlier this month and KB Kookmin Bank last week, Hana Bank has also begun restricting loans.
Loans arranged through loan brokers have also come under limits. Industrial Bank of Korea (IBK) has blocked mortgage loans via brokers since the 25th, and starting in Aug. it plans to halt group loans previously offered to new move-in business sites. KB Kookmin Bank has reduced the intake limit for loan solicitation corporations that had been temporarily increased, and other banks are also reviewing broker loan restrictions.
Among borrowers who have purchased or plan to purchase real estate, there is talk that they should secure loans as soon as possible. Additional government loan curbs are expected next month, and there is a high chance the base rate will be raised in the second half.
As of the previous day, the five major banks—KB Kookmin, Shinhan, Hana, Woori, and NH NongHyup—offered five-year fixed-rate mortgage loans at 4.51% to 7.50% annually, with the upper end nearing 8% per year.