South Korean Banks See Collective Loan Balance Rise Amid Housing Demand, But Buyers Struggle for Funds

South Korean banks have experienced a significant increase in collective loan balances, surpassing 2 trillion won in the last four months. This surge is primarily driven by a growing demand for mid-term and final payment loans, coinciding with a wave of apartment move-ins across the country. The five major commercial banks, KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup, reported a collective loan balance of 148.26 trillion won as of June 6.

While initial months of the year saw a decrease in these loans, the trend reversed in April, marking a consistent upward trajectory. This increase is directly linked to the large-scale apartment complex move-ins, particularly in the Seoul metropolitan area, which has spurred demand for financing. Despite this demand, the supply of final payment loans from banks remains insufficient.

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We are having trouble getting final payment loans.

Many prospective apartment owners are facing difficulties securing the necessary funds, with some resorting to competitive application processes to obtain loans. Online communities are abuzz with discussions about alternative financing, including loans from loan sharks or secondary mortgage lenders, highlighting the severity of the credit crunch. This situation has prompted discussions about potentially excluding certain collective loans, like final payment loans, from the government's household debt management regulations.

The goal is to prevent situations where buyers, who have already signed contracts, are unable to secure funds for their final payments due to these regulations. However, even if these loans are excluded from the total debt management, borrowers may still not be able to secure the full amount needed. The actual loan amount will depend on individual debt-to-income ratios (DSR) and loan-to-value ratios (LTV), as well as how banks assess collateral value, particularly in areas where the gap between sale prices and market values is substantial.

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We need to exclude final payment loans from household debt management.