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Banks Adjusting Mortgage Loan Rates

Posted November. 13, 2006 07:00,   


Banks are modifying their lending rates for mortgage loans by lowering or repealing their prime rates.

In addition to these bank lending rate increases, if the government follow-up real estate measures include reinforcing mortgage loan controls, including Loan to Value Ratio (LTV) and Debt to Income Ratio (DTI) controls, residential mortgages are expected to become harder to get.

According to the Financial Supervisory Commission and the bank industry yesterday, Kookmin Bank decided to lower its discretionary lending rate, which can be offered by branch managers, from 0.7 percentage points to 0.5 percentage points, down 0.2 percentage points starting November 17. This means that lending rates became 0.2 percentage points higher, in that only those who meet specific qualifications, including having established salary transfer accounts and savings accounts, can enjoy the benefits of branch manager discretionary lending rates. Shinhan Bank is going to lower the discretionary lending rate by 0.1 to 0.2 percentage points this week.

Prior to this, as of November 9, Woori Bank abolished the prime rate system that allowed branch managers to discretionarily offer a lower lending rate up to 0.2 percentage points less for mortgage loans.

Meanwhile, the government is planning to announce measures to stabilize the real estate market on November 15, including reducing apartment sales prices in public residential development sites, strengthening controls over LTV, which determines credit ceiling according to housing value, and DTI, which determines credit ceiling according to income, and relaxing controls on officetels.

sanhkim@donga.com sanjuck@donga.com