South Korea's major commercial banks have in effect exhausted their entire household lending capacity for this year, with new mortgage issuance shrinking and loan rates approaching 7.5 percent annually, deepening fears of a "lending cliff" for prospective homebuyers.
As of Wednesday, the combined household loan balance at the five major banks — KB Kookmin, Shinhan, Hana, Woori and NH NongHyup — stood at 649.66 trillion won ($436 billion), up 4.69 trillion won from 644.97 trillion won at the end of last year, according to financial industry data. The figures exclude policy-backed loans.
The five banks had submitted an annual household loan growth target of about 4.34 trillion won to the Financial Supervisory Service at the start of this year. With roughly half the year still remaining, they have already exceeded that target by about 350 billion won.
The gap between individual banks is wide. Three of the five have reached roughly 150 percent of their annual targets. One bank saw its household loans jump more than 400 billion won in a single week, instantly blowing past its cap. The remaining two have consumed 40 to 50 percent of their limits, but demand could flood toward those banks in a balloon effect.
Personal credit loans are driving the overall increase. The five banks' combined personal credit loan balance rose 1.38 trillion won in just two weeks, climbing from 108.67 trillion won at the end of last month to 110.05 trillion won as of Wednesday.
Over the same period, the mortgage loan balance grew 760.8 billion won, from 615.15 trillion won to 615.91 trillion won — meaning credit loan growth was 1.8 times that of mortgages. If the current pace continues through month-end, the monthly increase in credit loans is on track to be the largest since April 2021.
Banks have been rapidly pulling back on new mortgage originations since the second half began. From July 1 through Wednesday, the five major banks issued a combined 2.79 trillion won in new individual home-purchase mortgages, averaging 185.7 billion won per day — down about 25 percent from the daily average of 246.1 billion won in June.
Mortgage approvals, a leading indicator of future disbursements, have also declined. The four major banks excluding NH NongHyup approved a combined 2.3 trillion won in mortgages through Wednesday, averaging 153.6 billion won per day — roughly 15 percent less than in June and more than 20 percent below April, when applications surged ahead of the expiration of a capital gains tax exemption for multi-home owners.
Banks have halted loan applications through mortgage brokers and restricted access to mortgage insurance as part of broader efforts to manage total household lending volumes.
As access to loans tightens, the interest rate burden is also rising. As of Thursday, the five major banks' blended fixed-rate mortgages carried rates ranging from 4.77 to 7.49 percent annually. The lower bound was 0.31 percentage points higher than on June 12, and compared with the end of last year, the floor has risen 1.26 percentage points while the ceiling has climbed 0.84 percentage points.
The five-year bank bond yield, which serves as the benchmark for fixed mortgage rates, stood at 4.428 percent annually as of Thursday, up 0.929 percentage points from the end of last year. Market rates have been moving preemptively higher after the Bank of Korea raised its benchmark interest rate from 2.50 to 2.75 percent on Thursday and left the door open to further increases.
If banks continue to impose high rates and lending restrictions to stay within their volume targets, homebuyers seeking financing in the second half of the year face increasingly difficult conditions.
"If one bank lowers its rate, loan demand from other banks can shift over immediately," a bank official said. "It is not easy to cut rates when managing total household loan volume is so urgent."
attom@heraldcorp.com
