Banks are belatedly raising the barriers for household loans. KB Kookmin Bank has decided to reduce its mortgage loan limit from 600 million won to 300 million won, followed by Shinhan Bank, which has begun restricting mortgage insurance subscriptions. NH Nonghyup Bank and Hana Bank have also implemented similar measures. The trend of lowering mortgage limits, halting loan recruitment, and restricting mortgage insurance is spreading across the banking sector. This reflects a judgment that the increase in household loans can no longer be ignored. However, raising the barriers overnight after being preoccupied with competitive lending during a rapid increase in loans is a typical case of a delayed response.
Managing household debt is necessary. With expectations of rising home prices and an increase in mortgage loans, banks cannot afford to be passive. The issue lies in the timing and manner of the response. Banks are aware of their annual household loan targets and monitor market conditions. Nevertheless, if they suddenly halve limits and restrict insurance subscriptions without adequate warning or buffer measures, the burden ultimately falls on borrowers. If financial institutions neglect risk management and then abruptly close their doors, it cannot be considered responsible finance.
The inconvenience for genuine borrowers should not be taken lightly. For those facing payment deadlines or preparing to move into newly built apartments, a reduction in loan limits is not merely an inconvenience. It can disrupt their entire financial planning and, in some cases, lead to contract breaches and credit risks. Placing all potential buyers, including first-time homebuyers and those looking to upgrade, at the same threshold under the pretext of curbing speculative demand is not a sophisticated management approach.
The staggered implementation of these measures by banks is also problematic. When one bank tightens its lending, borrowers flock to other banks that still have open doors. This prompts those banks to also impose lending restrictions. Ultimately, the market is left with growing uncertainty about which bank will close next. If measures to manage household loans lead to long lines at bank counters and a balloon effect, it indicates failed management.
A more significant issue is that the government's real estate response still relies excessively on loan regulations. When signs of rising home prices emerge, lending is tightened, and when transactions freeze, lending is loosened again. This approach has already shown its limitations multiple times. By ignoring structural factors such as supply shortages, concentration in Seoul, instability in the rental market, and distortions in tax and subscription systems, merely tightening loans will only temporarily halt the market. Cutting off the financial lifeline for consumers does not eliminate the causes of housing instability.
If the goal of real estate policy is to stabilize home prices, loan regulations should be a supplementary measure. There is a need for detailed criteria that protect genuine buyers while curbing excessive leverage. Exceptions and transitional provisions should be established for first-time buyers, genuine home seekers, existing contract holders, and those preparing to move in. Conversely, high-risk loans for multiple property investors or short-term profit motives should be managed more stringently. The current approach of uniformly lowering limits is administratively easy but politically blunt.
Banks also cannot be free from responsibility. Household loans are a major source of income for banks. During periods of rising interest rates, they increase interest income, and during real estate booms, they expand mortgage lending. However, when total management becomes burdensome, it is unacceptable to suddenly shift the inconvenience onto genuine borrowers. Even if lending thresholds are raised, prior notice, protection for existing applicants, and exception criteria at various stages of contracts must be established.
Household debt is at a dangerous level, and the overheating housing market must be curbed. However, in the rush to extinguish immediate fires, the financial plans of genuine borrowers should not be disrupted, nor should market instability be exacerbated. What is needed now is not stricter loan regulations but more sophisticated policies. Protective measures for existing contract holders and those with upcoming payments must be prioritized. Without a comprehensive approach that integrates supply, taxation, finance, and housing welfare, merely closing loan counters will not prevent further chaos.
* This article has been translated by AI.
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