Banks are raising the bar for household loans by cutting mortgage limits and increasing interest rates. With household loan growth expected to reach around 4 trillion won this month, KB Kookmin Bank's rate hike may prompt similar actions from other banks. The varying responses and timing among banks are contributing to confusion at loan counters.
As of July 28, the combined household loan balance of the top five banks—KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup—stood at 778.628 trillion won, an increase of 3.156 trillion won from the end of last month’s 774.9068 trillion won. Considering the remaining business days and recent growth rates, the increase for this month is projected to be around 4 trillion won.
In response to the persistent growth in household loans, banks are tightening their measures. Starting July 31, KB Kookmin Bank will raise interest rates on mortgage loans, jeonse loans, and credit loans by 0.06 to 0.53 percentage points. This follows a reduction in the mortgage limit for home purchases from 600 million won to 300 million won on July 10, making it the first major bank to increase household loan rates.
Other major banks have stated they are not currently considering additional rate hikes. However, within the financial sector, there is concern that if household loan growth continues, KB Kookmin's actions may spread to other banks. As of July 23, the household loan balance, excluding policy loans, exceeded the annual growth targets submitted by these banks to financial authorities by approximately 230 billion won, with three of the five banks already surpassing their individual targets.
Banks are responding differently based on their remaining quotas and loan growth rates. Some banks are limiting mortgage loan limits and restricting loan applications, while others are halting mortgage insurance subscriptions to curb loan growth. If interest rate hikes become widespread, the costs and conditions for borrowers could diverge significantly.
Financial authorities maintain that banks are adjusting household loans as part of their own risk management. However, by only presenting overall targets and leaving specific management methods to the banks' discretion, a situation has arisen where the availability and interest rates for loans vary depending on which bank a borrower approaches.
Critics point out that many of these measures are being implemented without any grace period, reducing predictability for borrowers preparing for loans. If demand that is blocked at one bank shifts to another, that bank may also resort to limiting quotas or restricting applications, creating a balloon effect.
Market voices are calling for greater transparency in the lending capacity and management standards of individual banks, even if financial authorities maintain their overall management stance. A financial sector official stated, “While each bank has different remaining quotas and may not take immediate action, if the growth trend continues, they will have to choose between reducing limits or raising rates. A minimum notice period and consistent standards are necessary for borrowers to plan their finances.”
As of July 28, the combined household loan balance of the top five banks—KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup—stood at 778.628 trillion won, an increase of 3.156 trillion won from the end of last month’s 774.9068 trillion won. Considering the remaining business days and recent growth rates, the increase for this month is projected to be around 4 trillion won.
In response to the persistent growth in household loans, banks are tightening their measures. Starting July 31, KB Kookmin Bank will raise interest rates on mortgage loans, jeonse loans, and credit loans by 0.06 to 0.53 percentage points. This follows a reduction in the mortgage limit for home purchases from 600 million won to 300 million won on July 10, making it the first major bank to increase household loan rates.
Other major banks have stated they are not currently considering additional rate hikes. However, within the financial sector, there is concern that if household loan growth continues, KB Kookmin's actions may spread to other banks. As of July 23, the household loan balance, excluding policy loans, exceeded the annual growth targets submitted by these banks to financial authorities by approximately 230 billion won, with three of the five banks already surpassing their individual targets.
Banks are responding differently based on their remaining quotas and loan growth rates. Some banks are limiting mortgage loan limits and restricting loan applications, while others are halting mortgage insurance subscriptions to curb loan growth. If interest rate hikes become widespread, the costs and conditions for borrowers could diverge significantly.
Financial authorities maintain that banks are adjusting household loans as part of their own risk management. However, by only presenting overall targets and leaving specific management methods to the banks' discretion, a situation has arisen where the availability and interest rates for loans vary depending on which bank a borrower approaches.
Critics point out that many of these measures are being implemented without any grace period, reducing predictability for borrowers preparing for loans. If demand that is blocked at one bank shifts to another, that bank may also resort to limiting quotas or restricting applications, creating a balloon effect.
Market voices are calling for greater transparency in the lending capacity and management standards of individual banks, even if financial authorities maintain their overall management stance. A financial sector official stated, “While each bank has different remaining quotas and may not take immediate action, if the growth trend continues, they will have to choose between reducing limits or raising rates. A minimum notice period and consistent standards are necessary for borrowers to plan their finances.”
* This article has been translated by AI.
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