Value context and insight. lkm@koreatimes.co.kr
Leveraged investors cry foul over toughened lending rules
A branch bank in Seoul / Korea Times file
By Lee Kyung-min
By Lee Kyung-min
More people have been finding it hard to borrow money from banks, asking for financial authorities to ease up on their tightening of lending rules.
NongHyup Bank decided to deny new mortgage loans until November. Some others announced they will reduce the amount of mortgage loans starting September. Other banks are likely to join the move.
This is raising anxiety among people who are planning to take out loans soon. Their debt from buying real estate and stocks will rise, as will interest. It will especially affect low-income earners suffering because of the prolonged COVID-19 pandemic who cannot extend their debts.
Household loans saw a net increase of 78.8 trillion won ($66 billion) in July, up from January. This was 71.6 percent more than a 45.9 trillion won increase in the same period a year earlier. The net increase figure for the same period in 2019 before the pandemic was 23.7 trillion won.
Financial authorities expect household loans will continue to grow due to demand high for housing as well as stock investments.
The government plans to break the intensity of rising household debt this year, aiming to limit the debt to grow by no more than 6 percent. But household loans in July already increased 10 percent, or 15.2 trillion won, from a year earlier. Household loans from banks increased 9.7 trillion won, the highest jump the government has recorded in the time it has been compiling related statistics, which started in 2004.
Financial authorities ordered Korea's five biggest financial holding firms to manage the level of household loans they extend to customers, in a move to preclude the debt from posing a risk to the economy.
The country's top-tier financial holding companies said they will see if household loans related to speculation are causing people to invest more in real estate and stocks. They also said they will try to keep the debt increase rate under the government's suggested 6 percent.
Customers are likely to seek loans with non-bank financial institutions, including insurance companies, savings banks and credit card companies. Analysts say it is easier to borrow money there, albeit more expensive due to higher interest rates.