South Korean banks shift mortgage focus to loan availability as rates hit multi-year high

South Korean banks are shifting their mortgage competition from interest rates to loan availability as household debt management becomes more restrictive. Shinhan Bank and Hana Bank have begun allocating mortgage volumes up to two months in advance, with Shinhan providing a special 500 billion won limit for loans to be executed in November.

This shift is driven by strict total volume regulations on household debt. The five major banks have already seen household debt increase by approximately 7.29 trillion won since the end of last year, nearing the annual growth target set by financial authorities. Consequently, banks are managing loan supplies by specific execution months and channels rather than just annual totals.

Simultaneously, mortgage interest rates in South Korea have reached a multi-year high. According to the Bank of Korea, the average mortgage rate rose to 4.66% in August, the highest level since November 2022. While deposit rates remained relatively stable, lending rates for both households and corporations trended upward, widening the interest rate spread between deposits and loans.