KB Kookmin Bank's drastic measure to lower its mortgage limit to 300 million won nationwide stems from the growing burden of managing total household lending. With the government already tightening mortgage limits centered on the greater Seoul area and regulated zones, and KB now stepping up additional management, other banks are also expected to introduce similar measures depending on the situation.
According to KB Kookmin Bank, the bank had relatively more room to manage household lending through May this year. However, as loans, particularly mortgages, grew rapidly in June, the bank reportedly judged that meeting its annual management target would not be easy. The bank's annual household loan growth ceiling submitted to financial authorities this year stands at approximately 909.2 billion won. Of this, the target for mortgages is to reduce them by 417.2 billion won from the end of last year.
Through the end of May, mortgages were managed within the target range. Kookmin Bank's mortgage change from January to May was a decrease of 1.5476 trillion won, slightly exceeding the target reduction of 1.5429 trillion won for the same period. While it achieved its reduction target, the bank did not have much capacity to absorb additional increases in the second half. On top of this, as mortgage demand rose again starting last month, the burden of total volume management reportedly grew sharply. A Kookmin Bank official said on the 8th, "We judged that we needed to manage our portfolio preemptively, considering the recent rise in household lending and market conditions."
Kookmin Bank had progressively strengthened its household loan management measures ahead of this limit reduction. Last month, it temporarily suspended enrollment in mortgage insurance (MCI/MCG) and restricted loans conditional on repaying loans at other banks. Methods such as repaying a credit loan at another bank and then taking out a loan again at Kookmin Bank were subject to restrictions. The bank also stopped accepting refinancing loans transferring from other banks to Kookmin Bank. It ended preferential mortgage rate coupons that had been provided at branch managers' discretion. When the mortgage limit measure will be lifted remains undecided for now.
The market believes there is a high likelihood that loan demand will shift to other banks, given that KB cut its mortgage limit by about half. This is because some banks have already exceeded their June targets and do not have sufficient capacity for additional loans. A senior official at Shinhan Bank explained, "We are considering measures to reduce limits like KB."
Hana Bank is also looking into the possibility of additional restrictions. Hana Bank temporarily suspended new enrollment in mortgage insurance this month. A Hana Bank official said, "There is nothing additional under review yet," but added, "When a bank with a large mortgage market share cuts limits like that, demand inevitably shifts elsewhere." A financial authority official also said, "Since June, housing transaction volume has risen rapidly, and mortgages have increased at an unexpected pace," adding, "Since other banks are in no different situation, we see KB's measure as a starting signal for limit reductions."
The problem lies with genuine homebuyers and young people. With home prices in the greater Seoul area continuing to rise, further reductions in loan limits inevitably narrow the path to homeownership. According to the Korea Real Estate Board, nationwide apartment sales prices for the fifth week of June (as of June 29) rose 0.09% from the previous week. The greater Seoul area rose 0.20%, exceeding the national average. A financial industry official expressed concern, saying, "If loan limits are cut like this again, genuine homebuyers and young people will inevitably take a direct hit."
What matters is that, following commercial banks, the secondary financial sector including insurers is also reducing household lending. In fact, insurers are also cutting mortgage supply. Tongyang Life (082640) decided to suspend new apartment-backed loans starting this month. Samsung Life (032830) suspended mortgage applications through non-face-to-face channels until the end of next month, and Samsung Fire & Marine Insurance (000810) temporarily suspended both face-to-face and non-face-to-face mortgage handling. Hanwha Life (088350) and NH NongHyup Life have also suspended new mortgage handling.
In the second half, the risk coefficient for insurers' mortgages will also rise. Financial authorities are pushing a plan to slightly raise insurers' mortgage risk coefficients starting at the end of September. The core is to raise the risk coefficient for the 60-80% loan-to-value (LTV) range from the current 3.5% to 4.0%, increasing the capital burden required to handle mortgages.
Insurers are also reducing credit loans. Kyobo Life adjusted its credit loan limit from the previous 60 million won to 50 million won this month. Tongyang Life tightened its credit loan extension conditions. It made it so that at least 20% of the loan principal must be repaid for maturity extension to be possible. A Tongyang Life official explained, "New loans have already been suspended," adding, "To manage volume for existing loans only, we added extension conditions starting this month."
Samsung Fire also suspended new handling of some credit loan products this month. Hanwha Life is reviewing additional management measures including adjusting credit loan limits.
Policy loans, which account for a significant portion of insurers' lending, are also subject to management. Samsung Fire suspended policy loan handling for some low-surrender-value products such as "Super Insurance" and "First Class Low Surrender Value Refund" starting this month, and Hanwha Life is reportedly also reviewing measures to manage policy loans. The policy loan balance at 10 major life and non-life insurers rose from 54.9395 trillion won at the end of last year to 55.4612 trillion won at the end of March this year, and further swelled to 55.8872 trillion won at the end of May. An insurance industry official said, "We are reviewing measures to comprehensively manage credit loans, policy loans, and mortgages."
