The impact of KB Kookmin Bank's 300 million won cap on mortgage loans is growing across the market. This is because KB Kookmin Bank wields significant influence in the mortgage market, and when it cuts back on lending, demand is likely to shift to other banks and the secondary financial sector in a "balloon effect."
In that case, given the government's aggregate regulation capping household loan growth at 1.5%, those financial firms will have no choice but to tighten lending further. A deputy president in charge of credit at a commercial bank said on the 9th, "If KB Kookmin Bank, which has the largest household lending balance, raises the bar, loan demand will inevitably concentrate on the remaining banks." He added, "As the balloon effect appears in the secondary financial sector, including regional banks and mutual finance firms, the others will also end up reducing their loan limits."
In fact, experts say that stringent loan regulations have only a limited effect on stabilizing home prices, while producing a greater side effect of cutting off the housing ladder. In particular, it has been proven several times that loan regulations alone, without a mix of various policies such as supply, cannot rein in home prices. In December 2019, the Moon Jae-in administration completely banned mortgage loans on ultra-high-priced homes worth 1.5 billion won or more in speculative zones, but Seoul apartment prices rose 13% one year after the regulation and 32% within two years.
A 2023 paper by tax accountant Jeong Jin-o and Professor Jeong Jae-ho of Mokwon University, titled "A Study on the Effects of Real Estate Policy on Real Estate Prices: Focusing on Tax Policy and Financial Policy," analyzed the housing market from 2014 to 2021 and found that regulation-only policies during periods of rising home prices were ineffective and instead produced the side effect of raising prices through factors such as reduced transaction volume. Choi Hwang-su, a professor at the Graduate School of Real Estate at Konkuk University, pointed out, "If you can't buy a home because loans are blocked, you have to live in jeonse (a Korean lease system requiring a large lump-sum deposit instead of monthly rent), but with no jeonse supply due to the land transaction permit system, the phenomenon of being pushed into monthly rent will continue." He added, "Since loan regulations alone cannot change the direction of home prices, this may only increase the number of monthly-rent refugees."
KB Kookmin Bank's 300 million won cap is even more severe amid rising home prices. A 59㎡ (25-pyeong) unit at the Wolgye Hanjin Hanwha Grandville apartment complex in Nowon-gu, Seoul, traded for 1.06 billion won early this month. Borrowing from KB Kookmin Bank, which limits the maximum mortgage to 300 million won, would require 760 million won in cash alone.
The same-sized unit in that complex traded for 790 million won as recently as June last year, before the June 27 measures under which the government capped the maximum mortgage at 600 million won in regulated zones in the greater Seoul area. A high-income salaried worker with room to spare in their debt service ratio (DSR) could borrow up to 553 million won, equivalent to a 70% loan-to-value (LTV) ratio. In just one year, the funds needed to buy the same apartment more than tripled, from 237 million won to 760 million won.
In areas other than Nowon-gu, the required funds rise sharply. According to the Korea Real Estate Board, the average sale price of a Seoul apartment in May was 1.33 billion won, reaching 2.83 billion won in Seocho-gu and 2.81 billion won in Gangnam-gu. Yangcheon-gu (1.48 billion won) and Mapo-gu (1.42 billion won) also topped 1.4 billion won. To buy a home in Yangcheon-gu or Mapo-gu, at least 1.2 billion won in cash is needed, including transaction costs such as acquisition tax and real estate brokerage fees.
According to KB Real Estate data, as of June this year the average sale price of small- and mid-sized units (exclusive area of more than 60㎡ to 85㎡ or less) reached 1.18 billion won across the 14 districts of northern Seoul and 1.86 billion won across the 11 districts of southern Seoul. This is the backdrop for the diagnosis that, short of profits from stocks and cryptocurrency investment or a gift from parents, the path to buying a home has been cut off.
In the market, many say the answer is not simply to tighten loans but to differentiate regulations according to age group and asset situation. The Organisation for Economic Co-operation and Development (OECD)'s "2026 Korea Economic Survey," released this month, assessed, "If loan limits are set independently of borrowers' repayment capacity, they can restrict housing finance access for households with stable incomes but few accumulated assets." It added, "Once results from expanded housing supply emerge, there is a need to shift to repayment-capacity-based loan regulations such as the DSR." With first-quarter nominal gross domestic product (GDP) growing 17.1%, some point out that the aggregate loan target should also be changed.
However, financial authorities plan to maintain the regulatory stance for the time being. The Financial Services Commission (FSC) held a "household debt review meeting" that day and asked financial firms to make preemptive management efforts. It also asked companies that provide internal employee loans to manage them voluntarily, including setting first-priority mortgage rights, requiring installment repayment of principal and interest, and imposing limits on multi-home owners, high-priced homes, and housing area. Seok Byung-hoon, a professor of economics at Ewha Womans University, said, "In a triple surge in which Seoul's jeonse, monthly rent, and sale prices are all rising, loan regulations will only add to the public's housing cost burden."
