Banks Slash Loan Limits Drastically... 'Managing Total Volume' Following BOK Rate Hike

Following the Bank of Korea's rate hike, major five banks are making it more difficult to take out loans. According to the financial sector on the 19th, the household loan balance of KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup banks as of the 15th of last month stood at 649.66 trillion won, already surpassing the annual growth target of 43.4 trillion won in the first half of the year. To curb the surge in lending, banks have shifted to a more conservative business strategy.

Woori Bank reduced the monthly processing limit per branch for housing-related loans, such as mortgage loans and jeonse (deposit) loans, from 30 billion won to 10 billion won starting the 16th. If the quota at the visited branch is exhausted, customers must check other branches to see if they can receive a loan. New handling of individual mortgage loans for home purchases by the five major banks in the first 15 days of this month stood at 2.78 trillion won, a decrease of about 25% from the previous month. With move-ins scheduled for November, one borrower preparing for a loan faced a setback in their plans to pay the balance after their primary bank, KB Kookmin, reduced their mortgage limit from 600 million won to 300 million won.

Alongside lending regulations, loan rates continue to rise. The Bank of Korea raised the base rate by 0.25 percentage points from 2.50% to 2.75% annually for the first time in 3 years and 6 months. Fixed mortgage rates at the five major banks range from 4.77% to 7.49% per annum.