Following Nonghyup Bank, Woori and SC First Bank also restricted the handling of some household loan products.
Household Loan Growth Rate
[아시아경제 박선미 기자] Following NH Nonghyup Bank’s suspension of new home mortgage loans, Woori Bank and SC First Bank also restricted or suspended the handling of some household loan products. In addition, interest rates on credit loans, including negative bankbooks, which have been easily borrowed so far, have risen sharply, and the interest burden of borrowers is rapidly increasing.
Following the Nonghyup, Woori and SC also restrict some loans
According to the financial industry on the 21st, Nonghyup Bank has decided to suspend subsidies covering new, increased, and renewed contracts, including not only housing but also non-housing such as land and forests, from the 24th to the 30th of November. Woori Bank also significantly restricted the handling of new Jeonse loan loans.
Woori Bank sets a new limit on the handling of cheonsei loan on a quarterly basis, and when the limit is exhausted, it no longer accepts new applications. SC First Bank also stopped handling new balance cofix interest rate linked products among First Home Loans, one of the collateralized loans.
End-users are pouring in complaints from end-users who are concerned that there will be problems in financing due to the spread of the bank’s suspension of household mortgage loans. Bank branches were flooded with phone calls regarding the suspension of the payment service. The day before, at the window of each branch of Nonghyup Bank, most of the people inquired about when to receive a loan application and the documents and procedures to prepare in advance to get a loan. Ahead of the payment of the installment payment for the new apartment, some asked whether group loans were also within the scope of the total suspension.
Other banks were in a similar situation.
As rumors circulated around the online community that loans from other banks would soon be disrupted, calls to ask about the possibility of loan suspension in the future poured in. In particular, among those who are planning to raise funds ahead of the autumn moving season, the total debt-to-income ratio (DSR) of 40% including the suspension of commercial banks’ loans, the increase in the variable interest rate for the main loan, the reduction of the preferential interest rate, and the reduction of the limit of credit loans, etc. There seems to be a growing impatience that it is necessary to attract funds in advance due to the bursting loan regulations.
Mortgage interest rates are also rising
With the Bank of Korea announcing an interest rate hike as early as this month, borrowers are also deeply concerned.
As the COFIX (Funding Cost Index), which is used as a basis for calculating the floating rate-type main loan interest rate, has risen again, the variable interest rate for major commercial banks has been applied upwards since the 18th. Based on the new transaction amount, the main loan interest rate was 2.63% to 4.13% for Kookmin Bank, 2.62% to 3.63% for Woori Bank, and 2.71% to 3.62% for Nonghyup Bank, an increase of 0.03 percentage points from the previous day on the 18th.
As interest rates on credit loans, including those that were easily borrowed, soared, the interest burden also increased sharply. The average interest rate in Matong handled in June by the five major banks, KB Kookmin, Shinhan, Hana, Woori and NH Nonghyup, is 2.92 to 3.53 percent per annum. Compared to 2.62-2.97% a year ago, it rose by 0.6 percentage points. During the same period, Internet bank Kakao Bank also increased by 1.14 percentage points per year. The increase in interest rates on credit loans is due to the fact that banks are adjusting the total amount of household loans through preferential rates or limit reductions in line with the government’s orders, and the one-year bank bond yield, which is the basis for calculating interest rates, has risen.
The problem is that when interest rates rise, the demand for loans should decrease, but on the contrary, the number of borrowers is increasing and the debt burden of ordinary people only increases. This is because the frenzy of debt struggles in the real estate market and the stock market, centered on young people, does not subside, and the livelihoods have become so severe that it is impossible to repay existing debts due to the prolonged impact of COVID-19.
According to the Financial Services Commission, the total increase in household loans from January to July this year amounted to 78.8 trillion won. It surged 32.9 trillion won (71.6%) from 45.9 trillion won in the same period last year. This is 3.3 times higher than the 23.7 trillion won increase from January to July 2019, before the outbreak of COVID-19.
Park Seong-jin, Deputy Head of Market Team at the Bank of Korea’s Financial Markets Bureau, said, “As the demand for housing sales and jeonse-related funds, the demand for other loans for investment in risky assets such as stocks, and the demand for living and business funds related to the coronavirus are still high, the growth of household loans is unlikely to slow significantly. It will be difficult,” he predicted.
By Park Seon-mi, staff reporter psm82@asiae.co.kr
>Please activate JavaScript for write a comment in LiveRe.
.
