Bank Loan Access Tightens From July

Access to bank loans will become more difficult starting in July as commercial banks intensify household debt volume management. Banks plan to restrict loan supply by reducing their offerings of mortgage-related guarantee products and scaling back consultation channels.

Under a medium-to-long-term roadmap aimed at lowering the household debt-to-GDP ratio to the 80% range by 2030, financial authorities have set this year's household loan growth target at just 1.5%, less than half the projected nominal growth rate, to manage overall volume.

NH NongHyup Bank's housing mortgage loans surged by 1.6348 trillion won, exceeding its first-half target of 362.8 billion won by 4.5 times. Hana Bank recorded 112.7%, Woori Bank 227.0%, and KB Kookmin Bank 100.3%. These banks began implementing loan reduction measures in the first half. KB Kookmin Bank, Hana Bank, and NH NongHyup Bank have restricted subscriptions to MCI/MCG products, which effectively exclude the preferential payment amount when calculating loan limits for housing mortgages. KB Kookmin Bank and Industrial Bank of Korea will cease processing loans through loan consultants starting in August.

The threshold for loans like the 'Dimdol Loan,' intended for genuine homebuyers and low-income households, has risen due to the decreasing number of eligible homes amid rising property prices. While these lending regulations target multiple homeowners and speculative demand, they place a burden on genuine buyers and those scheduled for new occupancy in the current housing price surge. A bank official noted that as property prices climb, the number of homes eligible for 'Dimdol Loans' and similar programs for lower-income individuals is decreasing in the Seoul metropolitan area. If the trend of rising housing prices continues and policy loan standards remain unchanged, genuine homebuyers may need to broaden their search to areas like Gyeonggi Province.

Lending thresholds are expected to remain high in the second half. Financial authorities are not considering lowering Loan-to-Value (LTV) ratios. However, they might employ other measures such as reducing quotas for loan origination firms or limiting non-face-to-face loan inflows. Given that housing mortgages are contingent on property transactions, new loan applications are anticipated to decrease in the latter half of the year, making it likely that banks will meet the growth targets set by the authorities. Genuine homebuyers may face difficulties in the bank loan market for the time being.