South Korea's major banks saw mortgage applications surge early last week ahead of the implementation of tougher screening rules, market sources said Tuesday.
The five leading lenders -- KB Kookmin, Shinhan, Woori, KEB Hana and Nonghyup -- notched up mortgage applications of more than 3,200 last Monday and Tuesday, respectively. The average number stayed in the 2,000 range in the first 20 days of this month.
The amount of applied mortgages came to 419 billion won ($373 million) and 366 billion won each, well above the 200-billion-won-band average before the two days.
Market analysts said the jump came as would-be home buyers rushed to borrow mortgages before tougher lending rules came into force.
Early this month, the government unveiled a package of measures to the overheating housing market, which is cited as the main culprit for soaring household debt.
The government designated all 25 wards in Seoul and two cities -- Sejong and Gwacheon, south of Seoul -- as "speculative or overheated speculative districts." In particular, 11 districts in Seoul and Sejong were designated "speculative districts" subject to far tougher taxes, financial regulations and state scrutiny.
The loan-to-value and debt-to-income ratios were cut to 40 percent in all those districts, limiting mortgages to 40 percent of apartments worth 600 million won or more and a maximum 40 percent of their income for mortgage payments.
The lower LTV and DTI ratios went into effect for the 11 districts in Seoul and Sejong on Aug. 3. The tougher rules were implemented for the overheated speculative districts from last Wednesday.
Banking sources said the full-fledged implementation of the anti-speculative measures will put a damper on an uptick in home-backed loans. Indeed, the number of mortgage applications fell to slightly over 1,500 last Wednesday, with the amount dropping to 156 billion won.
The government has been striving to curb snowballing household debt, a perennial bugbear for policymakers. South Korea's household debt stood at 1,360 trillion won at end-March, up from 1,343 trillion won from the end of 2016. (Yonhap)