A real estate agency in Eunpyeong-gu, Seoul, displays officetel listings. [Yonhap]
A real estate agency in Eunpyeong-gu, Seoul, displays officetel listings. [Yonhap]

With financial regulators doubling this year's household debt growth target, major commercial banks are expected to gain significantly more room to extend mortgage loans. If the expanded quota is channeled primarily into home-backed lending, the top five banks could arithmetically unlock up to around 7.5 trillion won in additional mortgage capacity.

The combined household loan balance at KB Kookmin, Shinhan, Hana, Woori and NH NongHyup stood at 650.77 trillion won ($460 billion) as of Thursday, excluding policy loans, according to financial industry sources. That marks an increase of 5.8 trillion won from 644.97 trillion won at the end of last year.

The five banks set an annual household loan growth target of 4.34 trillion won in consultation with regulators at the start of this year. The current balance has already exceeded that target by 1.47 trillion won.

With roughly four months left until year-end, banks that have already blown past their annual targets have moved to tighten controls sharply — cutting loan limits, blocking loan-solicitor channels and suspending new non-face-to-face loans. The crackdown triggered a rush of applications the moment loan windows opened, with borrowers flooding in at the start of business and clicking frantically in the early morning hours to secure spots.

Breaking down the figures, it was not mortgage loans but other lending — including unsecured credit loans — that drove the overall rise in household debt.

The five banks' combined mortgage balance stood at 492.17 trillion won as of Thursday, up 1.12 trillion won from the end of last year. The figure covers individual mortgages, jeonse (lease deposit) loans and collective loans such as relocation, interim and final payment financing.

The annual mortgage growth target for this year is 1.7 trillion won. Actual growth came in 584.1 billion won below that target, indicating relatively stable management — a result analysts attribute to banks having tightened limits and restricted solicitor and non-face-to-face channels.

Other loans, by contrast, surged 4.69 trillion won from the end of last year to 158.61 trillion won, overshooting the annual growth target of 2.63 trillion won by 2.05 trillion won. Although the balance of other loans is roughly one-third that of mortgages, this year's increase was more than four times larger.

ATM machines at major banks in Seoul. [Yonhap]
ATM machines at major banks in Seoul. [Yonhap]

A major factor was a surge in debt-fueled stock investment — known locally as "debt investing" — using overdraft accounts and credit loans during a period of rising share prices. "Many people borrowed to invest in stocks and then could not repay when prices fell," a commercial bank official said. "The balance of other loans rose faster than expected and has barely come down since."

In response, financial regulators signaled they would double the household debt growth target to 3.0% from 1.5% relative to the end of last year, and would prioritize directing the additional lending room toward mortgages for genuine housing needs rather than credit loans.

Financial Services Commission Chairman Lee Eok-won urged the financial sector on Friday to "make every effort to ensure that funds for genuine housing needs — including relocation, interim and final payment loans — are supplied on time without disruption."

The Korea Federation of Banks also said it would strengthen support for housing-supply financing while maintaining voluntary restraint on credit lending.

If the five banks' annual household loan growth target is doubled to 8.67 trillion won from the existing 4.34 trillion won, and that entire expanded capacity is directed toward mortgage lending, the calculation yields up to 7.56 trillion won in remaining room after subtracting the 1.12 trillion won in mortgage growth recorded so far this year.

However, 7.56 trillion won represents a maximum estimate based on the assumption that the entire expanded quota goes to mortgages. If the 4.69 trillion won increase in other loans recorded so far this year holds at its current level, the actual additional supply capacity would be smaller. The final mortgage supply figure will ultimately depend on how regulators allocate quotas across individual banks and how much of the other-loan balance is repaid.

A recent stock market pullback has slowed credit loan growth, a positive factor for expanding mortgage capacity. The five banks' combined credit loan balance stood at 109.77 trillion won as of Thursday, up just 13.1 billion won from the end of July — in effect a near-complete halt compared with increases of more than 2 trillion won each in May and June.

"The specific quota targets will be finalized soon through consultations with regulators," another commercial bank official said. "We expect both genuine borrowers and banks that have significantly overshot their mortgage targets to gain some breathing room in managing their loan operations."


attom@heraldcorp.com