Following the banking sector’s aggressive household loan growth caps, major insurance companies in South Korea are now successively halting new mortgage loan applications. Genuine homebuyers who were turned away by banks had turned to insurers, but with those channels now also closing, funding options are rapidly disappearing for first-time homebuyers and borrowers facing upcoming lump-sum payments on new apartments. The potential for further interest rate hikes by the Bank of Korea in the second half of the year is expected to add even more weight to the housing affordability burden on ordinary citizens.<\/p>\n
According to financial industry sources on the 6th, Samsung Fire & Marine Insurance has completely suspended mortgage loan applications through the end of this month. Previously, the insurer had limited operations to select branches, but now applications are blocked across all channels, including in-person counters and mobile apps. Samsung Life Insurance has also temporarily halted mortgage applications via its mobile app, while Hanwha Life Insurance has yet to resume accepting new applications.<\/p>\n
This cascade of insurers shutting their lending windows stems from a concentration of loan demand triggered by tighter banking regulations. According to South Korea’s Financial Services Commission (FSC), household loans across the insurance sector swung sharply from a 400 billion won decline in April to a 900 billion won increase in May. Industry sources explain that even after raising interest rates, loan demand continues to flow in, causing monthly lending limits to be exhausted faster than anticipated.<\/p>\n
Consider the case of office worker “A,” who is scheduled to move into an apartment in Gyeonggi Province this August. After finding that his bank mortgage loan limit was far smaller than expected, he explored insurance company loans, only to be told that applications themselves had been suspended. First-time homebuyers like A are facing an increasingly narrow set of pathways to secure a loan, regardless of whether they approach a bank or an insurer.<\/p>\n
The FSC recently summoned not only insurance industry representatives but also credit card and capital companies in succession, ordering them to strengthen household loan management. The aggregate loan growth management is effectively expanding across the entire financial sector. Banks are already accelerating their own lending curbs. KB Kookmin Bank, NongHyup Bank, and Hana Bank have restricted new issuances of Mortgage Credit Insurance (MCI) and Mortgage Credit Guarantees (MCG), reducing maximum loan limits by up to 55 million won based on Seoul property standards. Industrial Bank of Korea has halted mortgage loans through loan brokers, while KB Kookmin Bank has also reduced the acceptance limits for corporate loan brokerage firms. With mutual finance institutions also restricting mortgage and group loans for non-members, alternative funding channels for genuine homebuyers are rapidly vanishing.<\/p>\n
While financial authorities are reviewing a relaxation of regulations on relocation loans to support expanded housing supply, the prevailing view within the banking sector is that actual lending capacity will remain limited. The high-intensity household loan growth caps remain in place, and the recent stock market rally has triggered a surge in credit loans, leaving banks with insufficient capacity to handle housing-related lending.<\/p>\n
As part of a comprehensive real estate policy package, the FSC is reviewing measures to improve lending regulations related to redevelopment and reconstruction projects. Following suggestions from the Ministry of Land, Infrastructure and Transport and the construction industry, authorities are examining whether there is a need to ease regulations on relocation loans, which are currently subject to a 40% loan-to-value (LTV) cap. Since all of Seoul was designated a speculative overheating zone last year, relocation loans have been subject to the same regulations as standard mortgage loans. Critics have argued that applying the same standards used for purchasing a home to funds intended for securing temporary housing during a construction period is excessive. While the FSC is still in the review stage, the move is being interpreted as a signal that authorities may approach loans necessary for housing supply differently from general lending.<\/p>\n
The reality facing banks, however, is far from easy. According to the office of People Power Party lawmaker Lee Yang-soo, the household loan growth rates suggested by financial authorities to the five largest banks \u2014 KB Kookmin Bank, Shinhan Bank, Hana Bank, Woori Bank, and NongHyup Bank \u2014 are effectively converging on zero. Each bank’s household loan growth target for this year is as follows:<\/p>\n
BankHousehold Loan Growth TargetWoori Bank0.71%Hana Bank0.70%NongHyup Bank0.70%Shinhan Bank0.69%KB Kookmin Bank0.59%<\/p>\n
The total annual amount each bank can increase ranges from 800 billion to 900 billion won, essentially requiring them to maintain balances at last year’s year-end levels. The problem is that the recent stock market rally has caused credit loans to swell rapidly, triggering an emergency for aggregate loan management. As of the end of May, credit loan balances at several major commercial banks had already significantly exceeded their targets. Shinhan Bank was supposed to have reduced its credit loan balance by 24.2 billion won from the end of last year, but it actually increased by 169.6 billion won. Hana Bank, which was supposed to have reduced its balance by 36.4 billion won over the same period, saw an increase of 172.5 billion won instead.<\/p>\n
The burden of managing household loans has grown even heavier since last month. As of the 2nd of this month, the combined credit loan balance at the five major banks stood at 109.16 trillion won, up 2.65 trillion won from 106.52 trillion won at the end of May. A major factor was the increased use of overdraft lines of credit \u2014 so-called “debt-fueled investing” \u2014 amid heightened stock market volatility.<\/p>\n
Ultimately, banks are taking the position that they have no choice but to adjust housing-related loans to meet their household loan aggregate targets. Overdraft lines of credit, the primary culprit behind the surge in credit loans, are structured to allow withdrawals within pre-established limits, making them difficult to curb through additional regulations. “The utilization rate of overdraft lines at major banks is still in the 40% range, meaning there is room for further increases,” one commercial bank official said. “Even if relocation loan regulations are eased, the scale that banks, which must meet aggregate growth caps, can actually handle will be limited.”<\/p>\n
Financial industry observers expect the funding burden on genuine homebuyers to grow further, compounded by the possibility of additional Bank of Korea benchmark rate hikes in the second half of the year. “In the past, if a bank loan was blocked, it was possible to move to an insurance company or another financial institution, but now the entire financial sector is simultaneously managing household loan aggregates,” one industry insider noted. “While I sympathize with the policy intent of curbing speculative demand, there is concern that cases of genuine homebuyers struggling to secure financing may increase.”<\/p>\n","protected":false},"excerpt":{"rendered":"Following the banking sector’s aggressive household loan growth caps, major insurance companies in South Korea are now successively…\n","protected":false},"author":2,"featured_media":76862,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[456],"tags":[845,846,10206,13919,13871,5177,13872,41743,41742,25324,19189,11560,39469],"class_list":["post-76861","post","type-post","status-publish","format-standard","has-post-thumbnail","category-bank-of-korea","tag-bank-of-korea","tag-bok","tag-hana-bank","tag-hanwha-life-insurance","tag-household-loans","tag-kb-kookmin-bank","tag-mortgage-loans","tag-overdraft-lines-of-credit","tag-relocation-loans","tag-samsung-fire-marine-insurance","tag-samsung-life-insurance","tag-shinhan-bank","tag-south-koreas-financial-services-commission"],"_links":{"self":[{"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/posts\/76861","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/comments?post=76861"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/posts\/76861\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/media\/76862"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/media?parent=76861"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/categories?post=76861"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/tags?post=76861"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}