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| Korea's mortgage loans increased 30 trillion won ($26.6 billion) last year from a year earlier. Yonhap |
South Korea's mortgage loans rose some 30 trillion won (US$26.6 billion) in 2018 from a year earlier, mainly due to a greater number of people moving into new homes, official data showed Sunday.
According to the numbers compiled by the Bank of Korea (BOK), outstanding leveraged loans stood at a little over 494.26 trillion won, up 6.5 percent from a year earlier.
The increase comes despite efforts by the government to curb loans extended by financial institutions in the face of a steep rise in household debt in recent years. The increase has been attributed mainly to people borrowing money to buy homes amid a spike in real estate prices.
Last year, policymakers introduced a debt service ratio system to control borrowing. This system takes into account the share of income used to service debt that makes it harder for most to take out large loans.
Mortgage loans by banks have been accelerating at a sharp pace since 2014 and shot up by 40.83 trillion won in 2016 alone, hitting an all-time annual high in terms of increase, before falling off to a more moderate 21.64 trillion-won gain in the following year.
"More people moving into new homes caused a natural rise in collective mortgaged loans, with borrowing also increasing as people scrambled to get money from lenders before the new tighter rules went into effect," a market watcher said.
The Ministry of Land, Infrastructure and Transport said some 627,000 homes were built in 2018, up 10.1 percent from a year earlier. Of these, some 480,000 were newly built apartment homes that usually involve people taking out collective loans from banks. This number represents a 59.3 percent spike compared with the average for the previous five years.
The BOK data then showed that with more people moving into new homes, there was a spike in people borrowing money to pay for "jeonse," long-term deposits on leased homes. Money borrowed to pay for such leases is classified as mortgage loans.
This unique property lease system involves a tenant paying a large deposit in place of monthly rent. It usually consists of two-year contracts, with the homeowner paying back the principal upon termination of the lease.
By region, the latest data showed a jump in loans being the most pronounced in Gangwon Province, which reported a 17.1 percent on-year increase, followed by the city of Gwangju at 16.4 percent. Both figures are significantly higher than the national average.
On the other hand, regions like the North Gyeongsang and South Chungcheon provinces reported a drop in borrowing, with figures for the industrial city of Ulsan contracting 1.8 percent on an annual basis.
The minus growth for Ulsan, one of South Korea's major industrial hubs, comes as the city has been hit hardest by restructuring in the shipbuilding sector and to a lesser extent a slow pace of growth in autos that affected borrowing and the ability of people to move into new homes. (Yonhap)
