NH NongHyup Capital is entering the retail mortgage market for the first time in its history. While the company has previously offered secured loans to individual business owners, this will be its first mortgage product aimed at ordinary households.
The company is targeting a September launch for the retail home-backed loan product and has assembled an internal task force dedicated to product development, industry sources said Monday. The initiative was identified through the company's "new business activation cell," an in-house unit set up to find new growth engines.
NongHyup Capital's entry is expected to broaden the range of mortgage products available in the capital finance sector. Until now, Hyundai Capital has been effectively the only capital company offering retail home-backed loans. With NongHyup Capital — one of the largest capital firms by assets — joining the market, the mortgage landscape long dominated by banks is opening further to second-tier lenders.
Industry observers see the product launch as a strategic move to capture mortgage demand that banks can no longer accommodate. Banks subject to household lending volume caps are expected to raise their lending thresholds further as they approach their limits.
As of late last month, the combined household loan balance at the five major banks — KB Kookmin, Shinhan, Hana, Woori and NH NongHyup — stood at 778.98 trillion won ($549 billion), up 4.02 trillion won from the previous month, extending two consecutive months of net growth in the 4 trillion won range. Mortgages led the increase: the outstanding mortgage balance reached 617.94 trillion won, rising 2.8 trillion won in a single month and accounting for 69.6 percent of the total net increase. The monthly gain was the largest in 11 months, since August last year, when the figure rose 3.7 trillion won. The problem is that banks have little room left to absorb that pace of growth. As of the same date, only two of the five banks still had headroom under their annual household lending targets set at the start of the year, and their combined remaining capacity fell short of 400 billion won. The other three had already exceeded their targets — in effect spent, given that demand is growing by roughly 4 trillion won a month.
Capital companies are also subject to the debt service ratio regulation, but their underwriting standards and lending terms are relatively more flexible than those of banks, leaving room to attract borrowers who have been turned away. NongHyup Capital's decision to enter the retail mortgage market at this juncture is widely seen as a direct response to that environment.
The shift in demand is already showing up in the data. According to materials the Financial Supervisory Service submitted to the office of People Power Party lawmaker Lee Yang-su on July 21, Hyundai Capital — the only capital company offering retail home-backed loans — recorded new mortgage originations of 84.35 billion won as of end-June. That was up 46.1 percent from 57.72 billion won at end-January, a gain of nearly half in just six months. The figures point to a balloon effect, with cash-strapped borrowers moving to second-tier lenders and accepting comparatively higher interest rates.
Analysts also note a strategic dimension for financial-group affiliates: by having a group-owned capital company absorb mortgage demand that the group's bank cannot meet, the conglomerate can retain customers who would otherwise go elsewhere. "As banks' household lending capacity narrows, capital companies affiliated with financial groups are likely to pick up mortgage demand from borrowers facing a lending cliff," one industry official said.
won@heraldcorp.com
