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| The view of buildings and apartment complexes in Seoul / Newsis |
Financial authorities to curb rising household debt with age cap
By Anna J. Park
Since major bankers newly launched 50-year maturity mortgage loans in July, balances for lenders' loan products have swelled quickly in just a month, raising concerns about the aggravated household debt situation in the country.
According to the financial industry, the accumulated amount of 50-year maturity mortgage loan balances held by KB Kookmin Bank, Shinhan Bank, Hana Bank and NH NongHyup Bank stood at 1.28 trillion won ($960 million), as of Thursday.
NH NongHyup Bank was the first among major local banks to introduce the new mortgage loan product on July 5. NongHyup's move was soon followed by Hana Bank on July 7, KB Kookmin on July 14 and Shinhan Bank on July 26. Woori Bank will also start offering 50-year maturity mortgage loans on Monday.
The total weight of the 50-year maturity loans, out of approximately 800 trillion won of the country's entire mortgage loan balance by the banking sector, is still miniscule. Yet, considering that it's been only about a month since the major banks began providing the 50-year maturity mortgage loans, the current loan balance of 1.28 trillion won at the major banks demonstrates the popularity of the new loan products.
With customers flocking to the product, financial authorities are considering putting an age cap in order to limit the subscriptions to the product. The move aims to reduce the snowballing size of household debt, a key risk factor of the Korean economy. Government officials during a household debt inspection meeting on Thursday attributed the introduction of the 50-year maturity mortgage loan as a key cause of the recent hike in household debt.
As of Sunday, the total household debt balance by five major local banks ― KB Kookmin, Shinhan, Hana, Woori and NH NongHYup ― stood at 679.8 trillion won, which is up by 668.5 billion won from the end of last month.
Although not confirmed yet, it is likely that the financial authorities will soon advise lenders to enforce the age cap on borrowers, making only those under the age of 34 eligible for the 50-year maturity loans. Currently, among the five major commercial banks, only Shinhan is already applying the age limit of 34 years on borrowers, when it comes to long-term mortgage loans over 40 years.
However, some consumers express discontent over the government's direction: "Mortgage loans mean that homes are being put up as a collateral. Then why should it be limited only to young people?" a netizen wrote in an online board at a major portal site, Sunday.
"The age should at least go up to 45 or so; 34 years old sounds too arbitrary," another netizen wrote, adding that the mortgage loans of such long maturity could help some households aiming to purchase their own home.
Some banking insiders pointed to the fact that banks' launch of the 50-year maturity loans was originally aimed at following through the government's policy direction to lower borrowers' burden on paying back principals. It is also in line with the government's move to ease loan restrictions early this year to relieve the real estate market. They say the financial authorities' move to curb the 50-year maturity mortgage loans seems like blaming banks on systematic matters like household debt or the real estate slumps.
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