Housing Loan Restrictions Tighten as Banks Cut Limits

The threshold for housing mortgage loans is rapidly increasing in South Korea. KB Kookmin Bank has halved the loan limit for homebuyers, and Shinhan Bank has also begun restricting access to mortgage insurance (MCI, MCG). As major banks tighten their lending practices in line with financial authorities' guidelines on household debt management, the burden of financing for actual homebuyers is expected to grow.

According to the financial sector on July 9, Shinhan Bank will limit access to mortgage insurance starting July 10. This insurance allows borrowers to obtain loans without applying a small rental deposit, known as 'banggongje.' If access is restricted, the actual loan limit for borrowers will decrease.

KB Kookmin Bank has also announced a reduction in loan limits. Starting July 10, the maximum loan limit for home purchase financing in the metropolitan area and regulated regions will be cut from 600 million won to 300 million won. The same limit will apply to non-regulated areas. Additionally, the limit for first-time homebuyer loans funded by the bank's own resources, excluding policy loans like the Ddimumdol loan, will also be set at 300 million won. While the government previously regulated the upper limit for housing mortgage loans in the metropolitan area to 600 million won through the 'June 27 Household Debt Management Plan,' this is the first time a major bank has independently lowered the limit to 300 million won.

The banking sector has been tightening household loans across the board. Shinhan Bank suspended new household loan applications through loan recruitment channels from July 8 until the end of the month due to the rapid depletion of monthly loan limits. Hana Bank has also restricted applications through recruitment channels for mortgage loans set to be executed in August since July 2.

The backdrop for these stringent measures is the pressure of managing the total volume of household loans. As of the end of June, the combined household loan balance of the five major banks—KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup—stood at 774.96 trillion won, an increase of 4.14 trillion won from the end of May (770.83 trillion won). This marks the largest increase since July of last year, when the balance rose by 4.14 trillion won. If this trend continues, there is a significant risk of exceeding the annual target.

As the lending restrictions spread among major banks, anxiety among actual homebuyers is intensifying. With banks simultaneously raising the threshold for mortgage loans, those facing imminent payment deadlines must revise their funding plans. Borrowers with upcoming payment dates have fewer options, needing to either increase their cash reserves or seek loans from other banks. If these options are not viable, they may have to consider borrowing from family or resorting to personal loans.

If demand shifts to banks that have not yet implemented mortgage limit reductions, those banks may also need to tighten their lending criteria to manage household loan volumes. Should these measures expand, it could soon become difficult for homebuyers to secure loans across the banking sector, further increasing their financial burdens.

A banking official stated, "As different banks implement varying measures for managing household loan volumes, borrowers are increasingly seeking out banks that still offer loans. The limits and conditions for loans at each bank may continue to change, leading to inevitable confusion for actual homebuyers."