Last month, bank mortgage loans rose by 2.7 trillion won, representing the highest increase in eight months since August of the previous year. This came after a surge in property transactions as more individuals aimed to sell their homes before the deadline for the temporary halt of the additional capital gains tax for multiple homeowners on the 9th. Given that mortgage loans are usually processed one to two months after signing a housing sales agreement, it is anticipated that mortgage loans will keep increasing this month.
◇Mortgage Loans of the Bank Increase by 1.3 Trillion Won
As reported by the Financial Services Commission and the Bank of Korea on the 17th, the overall household loan balance across all financial sectors rose by 3.5 trillion won last month, maintaining the same growth rate as the previous month. Although mortgage loan balances grew by 5.5 trillion won—up from 3 trillion won in the prior month—other types of loans, such as credit loans, fell by 2 trillion won, marking a decrease following a 500 billion won rise in the previous month.
Notably, bank mortgage loans, which had dropped by 200 billion won in March, saw a significant recovery last month. Directly provided bank mortgage loans fell by 1.5 trillion won in March but rose by 1.3 trillion won in the following month. This increase was due to multiple homeowners selling their properties to take advantage of the tax suspension and buyers securing loans to buy them. Indeed, apartment sales transactions in the capital region increased by 5,000 cases, reaching 27,000 from 22,000 in the previous month.
While housing deals involving properties owned by several homeowners stayed active until last month, bank mortgage loans are anticipated to keep rising this month. A representative from the Financial Services Commission mentioned, “Apartment transaction levels in March were the highest in five years for that time of year, and the situation in April is similar,” noting, “The volume of approved mortgage loans is expected to gradually grow throughout this month.”
The total loan amount in the secondary financial sector, which includes savings banks and mutual financial institutions, rose by 1.3 trillion won last month, with the growth rate decreasing from 3.1 trillion won in the previous month. Although group loans, such as those for temporary payments and relocation costs, were mainly concentrated in the mutual financial sector at the start of the year, leading to an increase in loans within the secondary financial sector up until March, the pace of growth slowed last month. This is due to secondary financial institutions ceasing group loans or imposing stricter lending limits in accordance with the government’s regulatory approach towards household loans.
◇Strict Measures Against the Misuse of Business Loans for Unapproved Uses
On this day, the Financial Services Commission convened a “Household Debt Review Meeting” and revealed intentions to enhance penalties for “loophole” activities, such as utilizing personal business loans for property purchases. Currently, financial regulators ban new business loans for one year if a person is found misusing personal business loans for purposes other than intended, and for five years if this occurs again. They intend to increase these periods to three years for the initial occurrence and ten years for the second, while also incorporating household loans into the restrictions.
Since late March, financial regulators have been carrying out on-site audits across all financial industries concerning the improper use of business loans for purposes other than intended. They are specifically identifying high-risk situations, such as when business registration and loan applications happen within six months or when wholesale/retail businesses are situated in apartments within the Gangnam Three Districts, and are conducting detailed investigations into these cases. For example, a case was uncovered where 400 million won was obtained as operating capital from a bank, with 399 million won used for home purchase funds.
Shin Jin-chang, the Secretary-General of the Financial Services Commission, said, “There are still motivations to bypass loan rules when buying property,” and mentioned, “We will maintain a firm approach to eliminate unlawful actions connected to the housing market.”
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