Despite recently tightened restrictions on mortgage loans as part of the Moon administration’s anti-speculation measures, the total loan balance for major banks continued to rise, albeit slightly, with borrowers turning to credit loans instead.

During the week following the real estate policy announcement on Aug. 2, the daily average of mortgage loans filed at the top four banks -- KB Kookmin, Shinhan, KEB Hana, and Woori -- stood at 277.4 billion won ($242 million). The amount was close to 275.2 billion won, the daily average on Aug. 1, a day before the announcement.

“As the government said that houseless users would not be subject to the new reinforced loan regulations, the number of mortgage loan applications has not decreased significantly,” said an industry official.

The proportion of credit loans, on the other hand, has been increasing slightly during the same period. The credit loan balance for the top five banks -- including NH NongHyup -- went up 362.1 billion won, from 92.6 trillion won on Aug. 2 to 92.8 trillion won on Aug. 9.

“With higher interest rates and shorter maturity, credit loans pose a quality risk on household debts,” said Lim Jin, a senior researcher at the Korea Institute of Finance.

“Unless there is a fall in loan demands, the restrictions in mortgage loans may only push borrowers to credit loans or more vulnerable alternatives.”

According to data from the Bank of Korea, the average interest rate for mortgage loans in June was 3.22 percent, while that for credit loans was 4.41 percent.

Last Wednesday, the Moon Jae-in government came up with extensive regulations on real estate transactions, seeking to curb speculation and control skyrocketing dwelling expenses.

A core part of the plan was to lower the ceiling of the loan-to-ratio and debt-to-income amount in mortgage loans in order to reduce the excessive amount of loan-based house purchases.

Considering that it would take around two weeks to revise the related banking supervising regulations, the Financial Services Commission Chairman Choi Jong-ku urged commercial banks to refrain from lending during the intermediate period.

“The bank chiefs should take a leading role in the risk management initiative so that a herd effect in lending does not take place,” he said at a conference on the day of the government policy announcement.

Current banking supervision rules ban borrowers from receiving a mortgage loan and then making up for the gap amount with credit loans.

But in reality, there are a number of expedients such as approving a credit loan for purposes other than house purchasing, or granting a credit loan a few months before a main mortgage loan. Some borrowers even choose to get a mortgage loan from one bank and a credit loan from another. 

(tellme@heraldcorp.com)