Seoul: One month after the introduction of tighter regulations on household loans, new applications for such loans have been more than halved, while the growth rate of outstanding loans at major banks has markedly slowed, data showed Sunday.
According to Yonhap News Agency, during the first 18 business days of July, the average daily amount of household loan applications, including mortgage and credit loans, submitted to banks totaled 1.78 trillion won (US$1.29 billion), marking a 56.5 percent drop from the same number of business days in June. This decline follows the government's imposition of a 600 million won cap on mortgage loans for property purchases in the capital region and the suspension of home-backed loans for multi-homeowners, effective June 28, aimed at curbing rising household debt and housing prices.
As of Thursday, the outstanding household loans at the top five banks-KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup-stood at 758.92 trillion won, reflecting an increase of 4.08 trillion won from the end of June. However, the average daily increase in July has slowed to 170.1 billion won, down 24 percent from the previous month's average of 225.1 billion won.
If this trend persists, the total increase in household loans by the end of July is projected to be 5.27 trillion won, compared to the previous month's rise of 6.75 trillion won. In response to this, the government has accelerated efforts to redirect funds away from mortgage loans toward key business sectors that drive innovative growth.
The authorities plan to review business loans across the financial sector to prevent any potential loopholes in the current regulations. "We began overhauling the risk-weighted assets (RWA) framework to redirect capital flows from mortgage loans toward artificial intelligence (AI), venture investments, and other more productive sectors. We are looking to make some adjustments within the boundaries of international standards," an official of the Financial Supervisory Service stated.