Financial Sector Tightens Loan Restrictions Amid Rising ​Household Debt

As the government ordered other lending restrictions to address the surge in household debt, insurance companies followed the banks in closing their ⁤lending doors. As the threshold for housing mortgage loans from banks increased, borrowers who ​had been looking to​ insurance companies are now​ having to ⁤turn away.

Insurance Companies Limit Housing Mortgage Loans

According to the insurance industry, Samsung Life Insurance is limiting⁣ housing⁣ mortgage loans for‌ homeowners in order to operate⁢ housing mortgage loans centered on actual demanders. Samsung ‍Life Insurance notified each of its branches that it is limiting housing mortgage loans ​for existing homeowners ⁤in ​the metropolitan ‍area.

They also blocked loans that required people who already owned a house to⁣ sell their existing house immediately upon purchasing a ​new house. This means that only people without a house can receive⁢ housing loans. They also stopped handling loans with a grace period where⁣ the principal ⁤is ‌repaid after a certain period of time.

Banking Industry Takes Drastic Measures

NH Nonghyup Bank sent an official document to its branches informing them that it would temporarily suspend loans ⁣for the purpose⁤ of purchasing houses in the metropolitan area for multiple homeowners with two or more houses starting on the 6th as part⁤ of its household loan management plan centered on actual demanders.

Nonghyup Bank will also limit⁤ the living stability fund for multiple homeowners with two or more homes in the metropolitan area to 100 million won.⁤ In order‌ to suppress speculative demand such ⁣as​ gap investment (purchasing a ⁤house with a jeonse deposit), conditional jeonse ​loan such as lessor ownership transfer, ‍cancellation (reduction) of⁣ senior bonds,‍ and ‌housing disposal ‌conditions will also be‌ temporarily suspended.

Kakao Bank also restricted the handling of housing mortgage loans for homeowners. As the household debt surge showed no signs of slowing down, with the⁢ balance of household⁣ loans and housing mortgage loans at major commercial banks increasing by the largest amount ever last month,​ the banking industry appears to be taking drastic measures.

Financial Authorities Plan to Strengthen Risk Management

Meanwhile, the financial authorities plan to ⁤instruct banks to⁢ strengthen⁤ their​ risk management by managing the debt service ratio (DSR) of high-risk loans such ‍as speculative loans or high total debt‍ service ratios. As household loans by banks, especially‍ those collateralized by housing loans, are rapidly increasing, they plan to move forward with macro-prudential⁢ regulations.

A Financial Supervisory Service official said, “Banks whose household loan growth exceeds their management plans will be guided to set lower⁢ DSR management goals⁢ when establishing their DSR management plans for each bank next year.”