Rising Difficulty in Borrowing: Suspension of Jeonse Loans and Increased Restrictions for Multiple Homeowners

Despite falling market interest rates and the longest streak of unchanged benchmark rates at 3.50%, obtaining loans is becoming increasingly difficult.

Despite falling market interest rates and the longest streak of unchanged benchmark rates at 3.50%, obtaining loans is becoming increasingly difficult. Banks have taken strong measures, including raising loan interest rates and suspending jeonse loans. Additionally, financial authorities plan to implement differential regulations starting next month to reduce loan limits in the metropolitan area. This article explores how these changes impact the lending market and what to expect in the future.

Obtaining loans has become increasingly challenging, even with a frozen benchmark rate of 3.50% and falling market interest rates. Banks are responding by raising loan interest rates and suspending jeonse loans, while financial authorities are preparing to tighten loan limits starting next month through differential regulations. This has heightened tensions in the lending market.

Interest Rate and Jeonse Loan Suspension

According to the financial sector as of the 22nd, the fixed-rate mortgage (home loan) rates at the five major banks range from 3.64% to 6.04% annually. This is a significant increase from last month’s range of 2.84% to 5.58%. Particularly, banks are adjusting their additional interest rates, causing loan rates to move contrary to market interest rates.

Since July, banks have raised loan rates over 20 times. Recent actions include additional rate hikes by Woori Bank and KB Kookmin Bank, which have also suspended or restricted jeonse loans. Shinhan Bank has completely halted jeonse loans and plans to further limit loan issuance in the future.

Regulatory Actions and Future Outlook

Starting next month, financial authorities will implement Stage 2 of the Total Debt Service Ratio (DSR) regulations, which will further tighten loan limits. Specifically, metropolitan area mortgages will face an additional 1.2 percentage points, while non-metropolitan mortgages will see an additional 0.75 percentage points. The scope of DSR will also be expanded to include jeonse loans and policy mortgages, tightening loan limits even more.

These measures are intended to manage household debt levels, but they also increase pressure on the lending market. Banks are currently exploring various measures for total loan management and are discussing additional restrictions, including the possible suspension of jeonse loans.

As the lending market faces increasing challenges with rising interest rates and restricted loan availability, the suspension of jeonse loans and heightened restrictions on multiple homeowners will pose significant difficulties for actual homebuyers. It is crucial to monitor these changes closely and approach future developments with caution.