Mortgage loans surge W2.3tr in a month as top 5 banks near lending limits

Mortgage and credit loans continued to surge at South Korean banks despite sweeping lending restrictions, with the combined remaining loan capacity at the country's five largest banks falling to less than 400 billion won ($278 million).

As of Thursday, the combined overdraft account balance at KB Kookmin Bank, Shinhan, Hana, Woori and NH NongHyup banks stood at 44.47 trillion won — the highest level since August 2022, when it reached 44.77 trillion won, according to financial industry sources Monday. The figure represents an increase of 1.19 trillion won from the end of June.

Total credit loan balances, including overdraft accounts, reached 110.05 trillion won as of Thursday, up 1.38 trillion won from the end of June. Banks attributed the increase in part to debt-fueled investment demand driven by a correction in the stock market.

Mortgage loan balances rose 2.28 trillion won over the same period to 617.43 trillion won. The increase came despite KB Kookmin Bank cutting its mortgage lending cap from 600 million won to 300 million won and banks moving to restrict access to mortgage credit insurance, suggesting that demand for real estate purchases remained strong.

Total household loan balances reached 778.79 trillion won as of Thursday, up 3.83 trillion won from the end of June.

The sharp rise in household lending has left banks with little room to extend further credit this year. As of Thursday, only two of the five major banks still had capacity remaining under the financial authorities' household lending volume cap, with a combined remaining limit of 394.2 billion won.

The five banks' combined household loan growth since the end of last year reached 5.34 trillion won, exceeding the financial authorities' annual target by 1 trillion won. With the banks having in effect exhausted their lending limits less than a month into the second half of the year, stricter demand-side measures — including cuts to preferential interest rates — are expected for the remainder of the year.