Balance payment loans to be exempt from bank lending caps; other mortgage controls to stay

Balance payment loans due this year are likely to be excluded from banks' household lending caps, according to financial industry sources. The move comes after financial authorities faced a wave of complaints from homebuyers who had purchased pre-sale apartments but could not complete their move-in because banks had sharply tightened lending in the second half of the year to rein in household credit. Interim installment loans and other forms of mortgage credit are expected to remain subject to existing regulations.

The Financial Services Commission convened a meeting Tuesday afternoon, chaired by Secretary General Shin Ji-chang, with officials from the Financial Supervisory Service and senior lending executives from the five major banks — KB Kookmin, Shinhan, Hana, Woori and NH NongHyup — to begin discussing measures related to group mortgage loans.

The main agenda item was developing a plan to exempt balance payment loans from the overall lending cap. The discussion follows an appeal made at a real estate policy forum hosted by President Lee Jae-myung on Thursday, where a buyer of a pre-sale apartment in Suwon described being unable to secure a balance payment loan because of the banks' lending quota restrictions.

Interim installment loans, which are already pre-committed under existing contracts, are expected to continue under current management practices, as banks have already factored them into their lending quotas.

"We will first assess the current situation at each bank," a financial authority official said. "Specific measures will be worked out at a later stage."

General mortgage loans and personal credit loans not covered by the balance payment exemption will remain subject to the same lending caps as before.

Financial Services Commission Chairman Lee Eok-won said at the real estate forum Monday that "if we ease lending, there is a risk of stimulating the overall housing market and triggering a vicious cycle of rising prices." He added, "The overall stance on real estate lending regulations must be consistent and strict. That seems unavoidable."