South Korean banks tighten mortgage limits amid debt control measures

Major South Korean banks are implementing a dual strategy to manage household debt while addressing housing supply needs. To comply with financial authorities' efforts to control total household debt, banks are tightening restrictions on general mortgage and credit loans. For instance, Hana Bank has temporarily suspended new mortgage and jeonse loan applications through loan collectors for November, while KB Kookmin Bank has maintained limits on mortgage loans for home purchases.

Simultaneously, banks are expanding the supply of group loans (잔금대출) for large-scale residential move-ins to support actual housing demand. However, a conflict has emerged regarding the valuation standard used for these loans. Banks are leaning toward using the original sale price (분양가) rather than the current appraised market value (감정가) to prevent the rapid depletion of the total loan quota allocated by authorities.

This shift toward using sale prices instead of market appraisals is expected to significantly reduce the loan limits available to prospective residents. In high-value areas like Gangnam, the difference is stark; for example, a resident might receive 1.3 billion won based on the sale price compared to 2 billion won based on market appraisal. Banks have requested government guidelines to resolve these discrepancies, while financial authorities plan to conduct intensive inspections of group loan status in September.