Bank home loan door closed... This year's target is below 7%

With the government’s strong loan regulation policies implemented, approaching the end of the year, major commercial banks have almost closed their household loan windows. This year, the growth of household loans is more than 7% lower than the initially set target.

According to financial industry reports on the 21st, the five major banks—KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup—had an increase of only about 7.4685 trillion KRW in household loans from January to December 18 this year. This is 7.4% below the annual target of 8.069 trillion KRW set in coordination with financial authorities. Since the government introduced the “6·27 Measures” in June last year, which required a significant reduction in loan growth targets for the second half of the year, commercial banks have been effectively restraining lending.

Notably, only two banks exceeded their targets and increased total loans, while the other three banks issued 43.4%, 17.2%, and 17.5% less than their targets, effectively achieving total volume control. As a result, some banks have not only stopped housing mortgage loans but also halted loans for living stability funds, and products linked to Mortgage Credit Insurance (MCI, MCG) have effectively been shut out.

This atmosphere is expected to continue into next year. It is reported that some commercial banks, including C Bank, have proposed to financial authorities to set next year’s household loan growth target at around 2%. This figure reflects only half of the nominal domestic GDP growth rate expected to reach 4.0%, considering rising prices. Traditionally, banks set growth targets based on nominal growth rates, but due to the government’s emphasis on reducing real estate-related loans and expanding productive finance, it is expected that lower targets will continue to be set in an exceptional manner next year.

President Lee Jae-myung recently pointed out at the Financial Committee work report that: “Finance should not pursue its own interests solely by mortgaging houses or land, but should direct funds to productive sectors such as enterprises,” criticizing existing financial practices. The government has also explicitly stated that by restraining household loans, it aims to stabilize the real estate market while shifting towards a policy of prioritizing corporate loans.

In fact, household loan growth has nearly stagnated after the end of the year. Since December, the total household loan balance of the five major banks has increased by only 142.3 billion KRW, with the daily increase dropping to 7.9 billion KRW, only one-sixth of November’s level. Notably, housing mortgage loans decreased by 261.7 billion KRW compared to the end of last month. If this trend continues until the end of this month, it is expected to turn negative after about 1 year and 9 months. Conversely, credit loans increased by 530.2 billion KRW during the same period, showing an opposite trend.

This trend is likely to continue in the future. It is expected that the government and banking industry will work together to suppress household debt growth while maintaining a focus on productive finance in the short term. This means that although demand for real estate-related loans may be slowed down, it could also create favorable conditions for small and medium-sized enterprises or startups to access funding.