Korean Banks Temporarily Suspend Mortgage Lending Amid Concerns Over Household Debt

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A customer talks to a cashier at the NH NongHyup branch in Seoul on Friday.  (Yonhap)

A customer talks to a cashier at the NH NongHyup branch in Seoul on Friday. (Yonhap)

Sources said on Friday that South Korean banks began to temporarily suspend lending against housing stock under pressure from financial authorities seeking to curb the growing snowball of national household debt.

NH NongHyup Bank, one of the five largest commercial banks in the country, has decided to suspend all mortgages from next week until November 30. The switchover and renewal of mortgage loans will also be suspended.

Lending to individuals will be tightened and clients will be able to borrow up to 100 million won (US $ 84,700) each, depending on their line of credit and annual wages.

Industry rival NH NongHyup Woori Bank repeated the move and decided to suspend new home loans until the end of September. A Woori Bank spokesman explained that it reached the limit of its mortgage quota between July and September. But he took a softer stance on these issues, saying he was willing to make some “limited” exceptions under certain circumstances.

Standard Chartered Bank Korea, the local arm of the UK banking giant, has partially suspended sales of home loans since Friday, while simultaneously cutting base rates on some of its key products.

Industry watchers predict that other commercial lenders and savings banks will soon join the bandwagon as Koh Seung-bom, a candidate for the Financial Services Commission, warned banks on Wednesday to take “tough” action against rapidly growing household debt “without delay.” …

According to the Bank of Korea, lending to the country’s population at the end of March reached a record 1,765 trillion won, up 9.5 percent from a year earlier.

The Bank of Canada’s decision to lower the base interest rate to 0.5 percent pushed people to take out loans to buy real estate amid a hot housing market.

Posted by Jung Min Kyung (mkjung@heraldcorp.com)



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