Local banks expected to limit household loan growth to 1% this year: sources

Customers at a bank branch after the government announced new measures to stabilize the real estate market in Seoul, Oct. 15. Yonhap

Major lenders in Korea are expected to limit the growth in their household loans to 1 percent this year, industry sources said Sunday, sharply lower than their initial target of around 2 percent and also lower than the 1.5 percent earlier suggested by authorities.

KB Kookmin, Woori, Hana, Shinhan and NH Nonghyup are expected to set average growth targets of around 1 percent, which would translate into a combined increase of roughly 6.45 trillion won ($4.34 billion) in household lending this year, they said.

One of the five banks has set a tentative goal of keeping annual household loan growth, excluding policy loans, at 0.7 percent this year after recent consultations with financial authorities, according to a banking official who asked not to be named.

The move comes even after the bank met its household lending growth target last year, which would normally allow it to keep its household loan growth at a similar rate, the official noted.

"Authorities recently proposed a 1.5 percent target for overall household loan growth across the banking sector, but individual banks are expected to set lower internal targets," said an official from another bank who also asked not to be named.

The government push to limit household loan growth comes as part of an effort to curb rising home prices.

Under a comprehensive policy package announced in October, the government designated 21 additional districts in Seoul as speculative zones, bringing all 25 districts in the capital under stricter regulations for real estate transactions.

It also tightened lending rules, lowering the cap on mortgage loans to as little as 200 million won, down from the 600 million-won limit set in June.