Mortgage Loan Balances Fall

Since the adoption on March 2 of DTI (debt to income) rate limitations, which screen the income of loan applicants for all mortgage loans in real estate speculation areas and districts that show excessive speculation in the Metropolitan area, mortgage loans have begun to show a slight decrease.

According to the banks on March 11, the mortgage loan balance of seven financial firms (Kookmin, Woori, Shinhan, Hana, Standard Chartered First, Korea Exchange Bank, and National Agricultural Cooperative Federation) decreased by 152.2 billion won as of March 8, from 190.802 trillion won in February, to 190.650 trillion won.

Although the increase in mortgage loans slowed coming into this year, a decrease in the mortgage balance is a very exceptional event.

This can be explained as being caused by two factors: the decrease in demand for purchasing new residences due to the stabilization of apartment prices, and the increase of people who are paying off existing loans due to high interest rates.

The bank that shows the greatest decrease in mortgage loans is Kookmin Bank, where the mortgage loan balance as of March 8 decreased by 76.1 billion won compared to February.

Shinhan Bank (-58.2 billion won), NACF (-37.7 billion won), Woori Bank (-19.5 billion won), and KEB (-14.7 billion won) followed.

The mortgage loan amounts of non-bank financial institutions such as mutual savings banks and mortgage financial companies are also expected to decrease or remain stable.

It seems that as the financial supervisory authorities began investigating the mortgage loan situation of loan companies, some loan companies set up internal limitations on daily loan caps and the number of loans.

An employee of a savings bank said, “In the past, mortgage loan applications showed high increase rates every March, but this year, applications are increasing very little.”

legman@donga.com