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The balance of mortgage loans for sole proprietors is declining, data showed. President Lee Jae-myung had earlier raised the question of whether loan-to-value (LTV) ratios were being excessively applied to real estate loans for sole proprietors, but the actual volume is shrinking.
According to the financial industry on the 29th, the balance of mortgage-backed loans to sole proprietors at the four major banks (KB Kookmin, Shinhan, Hana and Woori) stood at 30.4547 trillion won at the end of the first half of this year, down 1.0632 trillion won from 31.5178 trillion won a year earlier. The downward trend is also clear compared with the end of last year (31.1485 trillion won).
Analysts attribute this to tighter management of business loans amid a broader push to strengthen household loan regulations. Business loans can be granted LTV ratios of as much as 85 to 90 percent depending on the collateral. In particular, they are not directly subject to the borrower-based debt service ratio (DSR) regulation. For this reason, borrowing under a business name has been pointed to as a regulatory blind spot.
Banks are currently tightening the management of business loans. An official at one commercial bank said, "As post-lending review standards have continued to be strengthened recently, the diversion of loan funds is gradually being blocked," adding, "From the banks' perspective, there is also a risk of sanctions from improper loan handling, so we are conducting stricter reviews than in the past."
