The fallout is growing from KB Kookmin Bank's abrupt decision to cap mortgage loans at 300 million won, amid a "triple surge" in which home prices, jeonse (a Korean lease system requiring a large lump-sum deposit instead of monthly rent), and monthly rents are all rising at the same time. Given that the average sale price of a Seoul apartment tops 1.3 billion won, a buyer now needs around 1 billion won of their own money to purchase a home in the capital. Experts agree that excessive total-volume regulation of household loans is cutting off the housing ladder for young people and the middle class.
The Bank of Korea and the Financial Services Commission (FSC) said on the 9th that banks' household loans rose 7.6 trillion won from the previous month to 1,189.4 trillion won last month. Household loans grew 15.7 trillion won in the first half of this year, with half of that increase coming last month. The result stems from a simultaneous rise in demand and loan amounts as real estate prices continued to climb recently. Banks' mortgage loans indeed rose 4.3 trillion won last month, the largest increase since June last year, when they grew 5.1 trillion won.
Given the situation, major banks are tightening mortgage lending following KB Kookmin Bank. From the 10th, Shinhan Bank will restrict new sign-ups for mortgage credit guarantees and insurance (MCG and MCI), effectively reducing the mortgage limit by 50 million won. Woori Bank also discussed suspending MCG and MCI and cutting mortgage limits on the same day. In addition, financial authorities plan to announce additional regulatory measures late this month, including rules targeting non-resident single-home owners who buy for speculative purposes.
Lee Chang-moo, a professor of urban planning at Hanyang University, pointed out that "the function of mortgage loans is to provide young people with opportunities to buy homes based on their stable future income, but the housing ladder is being cut off." He added, "As the growth rate is set to rise, the assessment of household debt risk should also change."
