Hana Bank has raised its household loan management to a new level by temporarily suspending variable-rate mortgages, the segment where new mortgage demand is concentrated. Following the suspension of online mortgages and a reduction in credit line limits, analysts say that if a “balloon effect” emerges — with loan demand headed for Hana Bank spilling over to other banks — it could lead to additional lending restrictions across the banking sector.
According to financial industry sources on the 8th, Hana Bank has temporarily stopped accepting new applications for online mortgages since the 7th of this month. Starting on the 11th, it will lower the negative-balance account (overdraft) limit to 50 million won, and from the 12th, it will temporarily suspend new variable-rate mortgages at both branches and online channels. The measure capping each borrower’s combined household credit loan limit at 100 million won will also be maintained.
The market in particular expects the suspension of variable-rate mortgages to have a considerable impact. According to the banking sector, variable-rate loans have recently accounted for around 80% of new mortgages. Unlike at the start of the year, variable rates have fallen below fixed rates, prompting borrowers to shift quickly toward variable-rate loans. As of the 7th, Hana Bank’s variable-rate mortgage linked to six-month financial bonds ranged from 4.144% to 5.344% per year, 0.777 percentage points below the lower end of the five-year fixed hybrid rate (4.921% to 6.121% per year).
Hana Bank’s lending restrictions have been strengthening in stages recently. In June, after lowering the combined household credit loan limit to 100 million won per borrower, the bank suspended new enrollments in mortgage credit insurance (MCI) and mortgage credit guarantee (MCG) last month. When MCI and MCG enrollment is restricted, small-sum lease deposits must be deducted when calculating the mortgage limit, effectively reducing the amount available to borrow. Mortgages and jeonse (a Korean lease system requiring a large lump-sum deposit instead of monthly rent) loans received through loan brokers were also restricted in sequence for disbursements from August to October.
Not only Hana Bank but other major banks have already tightened their gates around mortgages. KB Kookmin Bank lowered the maximum limit for home-purchase mortgages to 300 million won. Woori Bank also reduced its monthly mortgage and jeonse loan limit per branch from 3 billion won to 1 billion won. In addition to cutting limits, restricting guarantees, and managing broker channels, banks have raised their management intensity to the point of halting new offerings of some mortgage products altogether.
Despite the series of measures, the pace of household loan growth has hardly slowed. At the end of last month, the household loan balance at KB Kookmin, Shinhan, Hana, Woori, and NH NongHyup banks stood at 778.9791 trillion won, up 4.0183 trillion won over one month. The monthly increase exceeded 4 trillion won for a second consecutive month. Of this, mortgages rose 2.7955 trillion won to 617.9411 trillion won, the largest increase in 11 months since August last year. As of the 2nd of this month, the increase in household loans excluding policy loans had also exceeded the banking sector’s annual management target by more than 1 trillion won.
The banking sector is watching the flow of loan movement following Hana Bank’s additional measures. If a particular bank sharply reduces its mortgage offerings, demand could concentrate within a short period at other banks still able to lend. A senior official at a commercial bank said, “It’s not yet at a level of concern, but if loans flow in faster than expected due to a balloon effect, we could make additional adjustments to broker channels or online offerings.”
However, even as banks raise loan barriers, the practice of separately supplying balance-payment loans for apartments nearing move-in continues. For “The H Bangbae” in Seocho-gu, Seoul, scheduled for occupancy in September, KB Kookmin, Shinhan, and Hana banks have decided to supply balance-payment loans of 100 billion won each, with Woori Bank and NH NongHyup Bank considering participation.
“Maegyo Station Pallucid” in Suwon, Gyeonggi Province, which is being occupied this month, was a site where concerns over financing arose among prospective residents as each bank’s balance-payment loan limits were quickly exhausted earlier. After subsequent consultations between financial authorities and the banking sector, the five major banks decided to supply an additional 100 billion won each, for a total of 500 billion won. Financial authorities are keeping separate capacity for supplying loans to genuine demand, including by excluding the Pallucid balance-payment loans from each bank’s household loan total management performance.
A financial industry official said, “In a situation where the growth of mortgages and credit loans must be curbed, banks also have to supply real-demand funds such as balance-payment loans for apartment complexes nearing occupancy, which inevitably increases the burden of total management.”
