South Korea Expands Bank Mortgage Lending Capacity by 7.5 Trillion Won

South Korean authorities announced plans to expand mortgage lending capacity by up to 7.5 trillion won through five major banks after lenders suspended loan applications due to exceeding annual growth targets. The five major banks surpassed their household loan annual growth targets set with financial regulators at the beginning of this year by approximately 1.4 trillion won, prompting them to halt non-face-to-face mortgage applications and reduce lending quotas. The government responded by raising the household debt total growth rate target from 1.5% to 3% and applying the increased lending capacity to mortgage loans. Financial Services Commission Chairman Lee Eok-won stated on May 14 that the expanded funding capacity would ensure stable and timely supply of funds for actual housing needs including relocation costs, interim payments, and final payments.

Banks Suspend Mortgage Applications After Exceeding Loan Targets

A commercial bank app displayed a notice temporarily suspending non-face-to-face mortgage loan applications. Other banks recently reduced mortgage quotas or stopped accepting new applications through loan agents. The five major banks exceeded their annual household loan growth targets by approximately 1.4 trillion won, leading them to restrict household lending. Recent posts on real estate community forums described buyers making "open runs" to internet-only banks that still had lending capacity. A homebuyer in their 30s expressed surprise at the difficulty of obtaining loans and questioned whether such efforts should be necessary to secure mortgage financing.

Government Raises Household Debt Growth Target to 3%

The government decided to partially ease mortgage lending restrictions for actual homebuyers. Authorities raised the household debt total growth rate target for this year from the existing 1.5% to 3% and applied the increased lending capacity to mortgage loans. The expanded mortgage lending capacity for the five major banks is estimated at up to approximately 7.5 trillion won. Financial Services Commission Chairman Lee Eok-won stated on May 14 that the expanded funding capacity of financial institutions would enable stable and timely supply of actual demand funds including relocation costs, interim payments, and final payments.

Financial Authorities to Discuss Loan Allocation This Week

Financial authorities plan to discuss the allocation of new loan amounts for individual financial companies starting this week.

FAQ

Q: Why did South Korean banks suspend mortgage loan applications?

A: The five major banks exceeded their annual household loan growth targets set with financial regulators at the beginning of this year by approximately 1.4 trillion won, prompting them to halt non-face-to-face mortgage applications and reduce lending quotas.

Q: How much mortgage lending capacity will South Korean banks gain?

A: The government raised the household debt growth target from 1.5% to 3%, creating an estimated maximum of approximately 7.5 trillion won in additional mortgage lending capacity for the five major banks.