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Demand for personal credit loans surges amid stricter mortgage rules


Korean banks’ personal credit loans extended to individuals have continued to soar in August, as the government tightened mortgage loan regulations to stabilize the overheated housing market, data showed Monday.

Outstanding balance of personal credit loans at five major lenders here -- KB Kookmin Bank, Shinhan Bank, Hana Bank, Woori Bank and NH Bank -- came to nearly 121 trillion won ($102 billion won) as of Thursday, up 1.28 trillion won from the previous month.

Following the largest-ever monthly rise of 2.8 trillion won in June, the latest gain extends the uptrend in the amount of credit loans taken out by individuals. The figure for July gained 2.7 trillion won on-month. 

The overall household debt also grew at a fast clip, reaching 936.5 trillion won as of end-July, up 7.6 trillion won from the previous month, hitting a 21-month high, according to data from the state-run Bank of Korea.

Personal credit loans are expected to further rise by end of this month due to the government’s tougher regulations on mortgage loans, industry sources say.

“Homebuyers have increasingly rushed to apply for personal credit loans after the government imposed stricter rules on home-backed loans as well as jeonse loans, designed for two-year leases,” said an official from a financial sector.

To put the brakes on the soaring mortgage loan demand, the government has rolled out a new set of real estate-related policies in recent months, including tougher standards for the loan-to-value ratio -- the amount of a loan compared to the value of a property that borrowers want to purchase.
In Seoul, which has been categorized as an overheated region, for example, potential homebuyers can borrow up to 40 percent of a house only when the house is worth less than 900 million won, and less for more expensive houses. Mortgage loans are completely banned on housing properties worth more than 1.5 billion won. 

Some market observers attributed the increased volume of credit card loans to retail investors’ buying spree, as they seek cheap equities in chaotic markets due to the coronavirus pandemic. 

“A growing number of retail investors have been taking out bank loans to buy stocks as the market recently gained vitality,” an official said. 

The combined turnover of the benchmark Kospi and secondary Kosdaq markets reached 31.2 trillion won per day on average in the first 13 days of August, up 31 percent from the prior month with money invested by individual investors accounting for some 73 percent of stock market turnover this month, according to the Korea Exchange.

By Choi Jae-hee (
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Korea Herald daum