Internet-only banks rise in mortgage lending sector

A man enters KakaoBank's customer center in downtown Seoul in this 2021 November file photo. Newsis

By Lee Yeon-woo

Internet-only banks are establishing their presence in the loan market through mortgage lending services, leveraging their non-face-to-face services and competitive interest rates as key strengths.

According to the financial industry, Thursday, the combined loan balance of the three internet banks here, namely KakaoBank, Toss Bank and Kbank, during the second quarter of this year, is expected to reach 53.9 trillion won ($41.2 billion). This figure represents a 35.4 percent increase compared to the same period last year.

Meanwhile, the combined loan balance of the four major commercial banks here ― KB Kookmin, Shinhan, Hana and Woori Bank ― stood at 1,159 trillion won, up 2.86 percent from a year ago.

The significant growth of internet-only banks in the loan market can primarily attribute to their assertive foray into the mortgage lending sector. Since last year, these banks have rolled out a variety of real estate-related products and have embarked on vigorous marketing campaigns, including offering interest rate discounts.

In April, KakaoBank expanded its mortgage loan services to include apartments and also townhouses and multi-family houses. They ran special events offering discounted interest benefits until the end of last month.

As a result, the rate of new mortgage customers switching from other banks to KakaoBank has seen a significant increase, rising to 54 percent in the second quarter of this year from 28 percent in the previous year. Among the borrowers who secured mortgage loans with KakaoBank, 82 percent were in their 30s and 40s.

Kbank has already cut the interest rates on its mortgage five times to date. The proportion of mortgages in the bank's overall loan balance nearly doubled to 30 percent during the second quarter of this year, from 14.5 percent at the end of last year.

Toss Bank, which has yet to introduce a mortgage service, is in full swing preparing to launch such services. They are currently in the process of recruiting staff for this endeavor. The industry anticipates that Toss Bank's joint loan project with Kwangju Bank will ultimately expand into housing-related loan products as well.

However, concerns about the potential hindrance to the government's deleveraging efforts or debt reduction have also emerged. As these banks boast a far-reaching customer base and competitive interest rates, there is a high possibility that they will absorb the growing loan demand, spurred by the recent recovery in real estate markets.