Banks are moving quickly to supply group loans for newly built apartments, but genuine end users seeking funds are still suffering a "loan drought." Because it is hard for banks to expand lending generously within the larger framework of the total household loan cap, those who apply first get approved while those who are late grow anxious over the limited allotment.
According to the financial sector on the 10th, Woori Bank and NH NongHyup Bank are set to be assigned the loan limit for balance payments for "THE H Bangbae" in Seocho District, Seoul. Earlier, on the 7th, KB Kookmin, Shinhan and Hana Bank each received a 100 billion won loan limit for this complex's balance payments, and Woori and NongHyup banks' limits are expected to be at a similar level.
Loan demand is expected to exceed this amount. Shinhan Bank, which was the first to be assigned the loan limit for THE H Bangbae balance payments, conducted a preliminary loan demand survey last week, and demand reportedly far exceeded the 100 billion won limit. The banking sector says it "may supply more depending on circumstances," but with the goal of managing total household loans in place, freely expanding the limit is not easy.
Collateral value standards also narrow lending capacity. THE H Bangbae is subject to the presale price cap system, with the maximum presale price for 84 square meters of exclusive area around 2.24 billion won. Asking prices in this complex have now topped 3.5 billion won, and most recently, on the previous month, a move-in right changed hands at 3.93 billion won.
Typically, for balance-payment loans, the loan-to-value (LTV) ratio is set based on 50% of the appraised value at move-in. Applying this method reduces the number of residents who can obtain loans within limited resources. For this reason, Shinhan Bank exceptionally prepared a plan to calculate 60% of the presale price and 50% of the appraised value separately, then apply the lower amount as the loan limit.
Because the allotments run out quickly, the loan terms are not favorable. A borrower who recently consulted on a group loan at a major bank was quoted a rate in the high 4% range even after receiving all preferential rates. The base rate is in the mid-5% range. According to disclosures by the Korea Federation of Banks, the average annual rate in June for amortizing mortgage loan products (maturities of 10 years or longer, based on new issuances) at the five major commercial banks (KB Kookmin, Shinhan, Hana, Woori and NH NongHyup) was 4.50%.
The pipeline of upcoming group loans is also sizable. In Seoul, starting this month with "Raemian Trini-One," group loans are queued up for "ACRO River Sky" in Oct., and "DE'FINE Artia" and "Summit The Hill" in Dec.
Combining balance-payment loans and interim-payment loans for the second half, the group loans banks will need to supply are estimated at 50 trillion won, with demand for balance-payment loans alone reaching about 26 trillion won. Although more allotments are set to be released, observers say competition among genuine end users for loans will inevitably continue for the time being.