South Korean Banks Halt Mortgage Insurance, Tightening Loan Access

South Korean banks are increasingly suspending mortgage insurance products, a move that is significantly tightening lending conditions and creating a potential "loan cliff" for borrowers. Woori Bank and SC First Bank announced they will temporarily halt offerings of Mortgage Credit Insurance (MCI) and Mortgage Credit Guarantee (MCG) starting mid-July.

This suspension is projected to reduce the maximum mortgage loan amount for individuals by as much as 55 million won (approximately $39,000 USD). Woori Bank will also drastically cut its monthly mortgage loan quotas for branches, reducing them from 3 billion won to 1 billion won. SC First Bank will cease MCI enrollment and reduce preferential interest rates by 0.1 to 0.3 percentage points.

These actions follow similar decisions by other major financial institutions, including KB Kookmin, Shinhan, Hana, NH Nonghyup, iM Bank, IBK Industrial Bank, and BNK Gyeongnam Bank, which had already suspended mortgage insurance. Banks are citing the rapid approach of their annual household loan growth limits as the primary reason for these restrictions, alongside the mortgage insurance suspensions and reduced preferential rates. KB Kookmin Bank, for instance, previously halved its mortgage loan limit from 600 million won to 300 million won.