Squeezing Housing Mortgage Loan

Recently, the household loan is indicated having increased too much and reached at risk level, however, the loan increased also in September.

So the government prepares to establish the policy to squeeze housing mortgage loan that is suspected as a main cause of stirring up real estate market.

At 22nd, according to Ministry of Finance & Economy (MFE) and financial institution, the lending amount of most of banks between 1st of September and 19th already reach the amount of August lending. If the tendency keeps, the lending amount of Shinhan, Chohung, Foreign Currency for September will be much over the August.

Lending for household had increased from March to July 4- 6 trillion every month. Particularly, the declining tendency turned to increase from August.

So, the government will open a financial policy committee at 27th participated high officers of MFE, Korea Central Bank, Financial Supervisory Commission, Financial Supervisory Service to establish a comprehensive policy.

MFE, Firstly, considers extending the subject of low housing mortgage loan as a part of 9/4 housing market stabilization policies, According to 9/4 stabilization policies, financial institutions should reserve more for loss account on housing mortgage loan excess 60% for speculation fevering district. However, some persons indicated that reserve account is not sufficient.

`Speculation fevering district`, actually, means `bidding fevering district`.

So, it is not fair that the districts of the price of apartment increased sharply excluded such as Gwachun, Bundang, Ilsan, Pyungchon, Sanbon and Jungdong. Additionally, reserve for loss account on rollover doesn`t need to be increased.

MFE also considers increasing risk weight for housing mortgage loan when calculating net asset rate of BIS.

If the risk weight increases, BIS declines, then banks should reduce housing mortgage loan. At the present, the weight of BIS rate for calculating net asset, ▽0% for national bonds ▽50% for housing security loan ▽100% for credit loan ▽100% for shares are applied.

One of MFE officer commented if BIS rate increase, the reliability of domestic banks drops, so set up a maximum housing mortgage lending for over 60% is considered rather than applying increasing risk weight on the loan.

Kwang-Am Cheon Seung-Jin Kim iam@donga.com sarafina@donga.com