'Room to Spare but Wary of Spillover'... Regional Banks Raise Mortgage Loan Rates

Regional Banks Raise Mortgage Rates This Month

Growth Targets Higher Than Major Banks,

But Smaller Loan Balances Could Mean Quick Surpasses of Limits

As the five major commercial banks (KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup) and the three internet-only banks (KakaoBank, Toss Bank, and K Bank) have tightened their management of household loans such as mortgage and unsecured loans, regional banks are also moving to block any spillover effect by suspending preferential rates on mortgage loans and raising interest rates.

According to the financial sector on July 5, as of June 30, iM Bank's mortgage loan rate (six-month floating rate) was 5.30–5.80%. On July 2, the range rose to 5.36–5.86%, with both the lower and upper ends increasing by 0.06 percentage points.

BNK Kyongnam Bank, which last month stopped offering unsecured loans through external platforms, also discontinued its special preferential rate for mortgage loan applicants starting this month.

Reflecting these changes, as of June 30, BNK Kyongnam Bank's mortgage loan rates were 5.19–5.69% (five-year fixed rate) and 4.52–5.12% (six-month floating rate). From July 1, the rates increased to 5.59–6.19% and 4.92–5.59%, respectively. The five-year fixed rate saw both its lower and upper ends rise by 0.40 percentage points, while the six-month floating rate saw its lower end rise by 0.40 percentage points and its upper end by 0.47 percentage points.

Gwangju Bank also adjusted its mortgage loan rates from 4.41–7.36% to 4.49–7.46% this month, with the lower end up by 0.08 percentage points and the upper end up by 0.10 percentage points.

Yonhap News Agency

The reason regional banks are suspending preferential rates and raising interest rates on mortgage loans is twofold: the five-year financial bond rate, which serves as the benchmark for fixed-rate mortgage loans, has risen; and there are growing concerns that, as major commercial banks and internet-only banks strengthen their loan management, demand for mortgage loans could shift to regional banks.

NH Nonghyup Bank has restricted new mortgage insurance subscriptions since May, while KB Kookmin Bank also joined in suspending mortgage insurance subscriptions on June 26. Hana Bank and Woori Bank have reduced unsecured loan limits to 100 million won, and Shinhan Bank is strengthening household loan management by reducing revolving credit line limits by 20% when extending maturities.

The three internet-only banks are also reducing limits on unsecured loans and revolving credit lines, and restricting some new loan issuances.

The household loan growth target set for regional banks this year is an average of 4%, which is higher than that of the major commercial banks, meaning they still have some leeway. However, because the total household loan balances at regional banks are relatively small, a rapid surge in mortgage loan demand could quickly lead to the target being exceeded.

As of the end of the first quarter, the combined household loan balance at the five regional banks (Busan, Kyongnam, Gwangju, Jeonbuk, and iM) was 74.3844 trillion won, up 1.9% from 72.6953 trillion won at the end of last year. This combined balance is less than one-tenth of the 765.7290 trillion won in household loans held by the five major commercial banks during the same period.

A representative from one of the regional banks said, "The household loan balances at regional banks are so small that they do not even match those of a single major commercial bank, so if a spillover effect occurs, the target could be quickly exceeded," adding, "If a surge in loan demand becomes evident in the second half of the year, we will roll out stronger measures to manage household loans, including mortgages."

This content was produced with the assistance of AI translation services.