Some Mortgages Are Withdrawn

The banking community which has been limiting its mortgage loans has begun to withdraw existing mortgages.

Those who have bought their house with bank loans have put their houses on sale in order to pay back their loans. As more real estates are put on sale, the real estate price is expected to decline in chain reaction. There are concerns for possible ‘mortgage loan’ crisis.

The banks have limited new mortgage loans by taking measures to lower their LTV rate and new mortgages according to recommendation of the Finance Supervisory Service in last November. On 5th November, the banks have decided to apply this measure to regular loans as well.

Recently, the Kookmin bank has announced those clients with payment arrears over 30 days within last six months has to pay back 10% of the mortgages in advance in order to extend their payment due dates. Especially for clients with worst arrears will have their mortgages withdrawn.

From January, the Woori Bank will also their LTV rate from 80% of the mortgage security to 70% and the standard of mortgage security price will be change from maximum prices to minimum prices, also plans to have some of the mortgage loans to be withdrawn.

From July, the Woori Bank plans to lower their LTV rate to 55% for all loans.

Chohung Bank also plans to lower 10% of their maximum loan limit for clients if the clients is extending a loan due date. Banks such as Hana, Shinhan, Foreign Exchange Bank and others plan to take similar measures.

“Unlike credit card loans and credit loans, the mortgage loans were untouched because of the securities but in order to prevent further bad household loans, some mortgages have to be withdrawn,” said one bank official.

The total mortgage amount of all banks including foreign banks as of last November is 128 trillion won. Among this amount, 29 trillion won (22%) is on due this year, according to estimates of Bank of Korea.

Chi-Young Shin higgledy@donga.com