Household loans surge as KB Kookmin Bank slashes mortgage limit, other banks may follow

KB Kookmin Bank announced a sharp reduction in its maximum mortgage loan limit, lowering it from 600 million won to 300 million won for loans intended for home purchases. This change, effective July 10, has prompted other commercial banks to consider similar measures. The move signals a tightening of household debt management as concerns about real estate market instability persist, particularly in the southern Gyeonggi region.

Shinhan Bank also announced on July 9 that it would restrict the use of mortgage insurance (MCI/MCG) starting July 10 to strengthen its management of total household lending. Limiting mortgage insurance, often taken out alongside a mortgage, effectively reduces the loanable amount. This insurance typically allows borrowers to receive the maximum loan-to-value (LTV) ratio by having a guarantee institution cover a portion of the deposit for small-scale tenants.

Several major banks, including KB Kookmin, Hana Bank, and NH Nonghyup, have already largely restricted new mortgage insurance applications since late May as part of their household debt control efforts. The banking sector is broadly tightening its grip on household loans. KB Kookmin Bank's decision to cap mortgage loans at 300 million won applies not only to regulated and Seoul metropolitan areas but also to non-regulated zones.

"Due to regulations specific to each bank, such as KB Kookmin Bank's loan limit reduction, there could be a temporary surge in loan demand shifting to other banks," noted a commercial bank official. "Considering this, it is likely that strong, simultaneous measures will be implemented across the banking sector for the time being." This suggests other commercial banks may soon follow suit with similar reductions in mortgage loan limits.

The backdrop for these measures is a significant increase in household loans. According to the Bank of Korea's "June Financial Market Trends" report, the outstanding balance of bank household loans reached 1,189.4 trillion won at the end of June, an increase of 7.6 trillion won from the previous month. This marks the largest monthly increase since August 2024, when it rose by 9.2 trillion won. Mortgage loans grew by 4.3 trillion won due to increased housing transactions in the Seoul metropolitan area and demand for mid-term payments for new developments. Other loans, primarily credit loans, increased by 3.3 trillion won, influenced by stock market investments.

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Due to regulations specific to each bank, such as KB Kookmin Bank's loan limit reduction, there could be a temporary surge in loan demand shifting to other banks. Considering this, it is likely that strong, simultaneous measures will be implemented across the banking sector for the time being.