A chart shows the trend in additional interest rates for home mortgage loans at South Korea’s five major banks, rising to 3.052% in January from 2.99% in October, according to the Korea Federation of Banks. Graphic by Asia Today and translated by UPI
March 10 (Asia Today) — Major South Korean banks are tightening mortgage lending standards ahead of an expected government plan to curb household debt, raising interest rate spreads and slowing the pace of new loans.
Financial industry data show that the average additional interest rate on new mortgage loans at the country’s five largest banks rose to about 3.05 percent in January, up 0.066 percentage points from the previous month.
The banks include KB Kookmin Bank, Shinhan Bank, Hana Bank, Woori Bank and NH Nonghyup Bank.
KB Kookmin Bank posted the largest increase, with its mortgage loan spread rising to about 3.46 percent. Shinhan Bank’s rate climbed to 2.29 percent, Hana Bank to 3.06 percent, Woori Bank to 2.84 percent and NH Nonghyup Bank to 3.61 percent.
Banks typically lower lending rates early in the year as they reset annual loan targets and compete to expand lending, a trend often referred to as the “early-year effect.”
This year, however, banks have moved in the opposite direction by raising mortgage spreads, contributing to higher borrowing costs.
The average mortgage interest rate at commercial banks reached about 4.29 percent in January, up 0.06 percentage points from the previous month.
Outstanding mortgage balances at the five largest banks totaled about 610.7 trillion won, or roughly $470 billion, at the end of February, down about 0.15 percent from the end of last year.
The decline contrasts with early last year, when mortgage balances rose about 0.85 percent in the first two months, suggesting that the typical early-year surge in lending has largely disappeared.
Analysts say the shift reflects banks’ efforts to prepare for stricter government oversight of household debt.
Financial regulators set annual targets for household loan growth and monitor banks’ lending activity to ensure compliance with those limits.
The government had initially planned to release its household debt management plan late last month but delayed the announcement for further review.
Industry officials say the upcoming measures could include tighter limits on overall lending growth, separate management targets for mortgage loans and stricter restrictions on loans to multiple-home owners.
Banks appear to be adjusting lending conditions in advance of the policy changes.
“Interest rates often decline early in the year as banks compete for borrowers,” a financial industry official said. “But this year the focus is clearly on controlling household debt, so banks are managing the pace of lending in line with policy expectations.”
— Reported by Asia Today; translated by UPI
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Original Korean report: https://www.asiatoday.co.kr/kn/view.php?key=20260310010002804
