[DigitalToday reporter Ji-young Lee] Financial authorities’ real estate finance policy is clearly splitting into two tracks: "total volume management" of household loans and support for housing supply. While keeping household loan management by each financial company, they are making exceptions for funds needed for housing supply, youth housing stability and support for end-users. Rather than tightening lending across the board, "selective management" that varies the intensity of controls depending on the nature and purpose of funds is taking shape in earnest.

According to financial authorities on Sept. 9, household loans across the financial sector rose 2.6 trillion won in August, less than half the 6.4 trillion won increase in July. The increase also narrowed compared with 4.8 trillion won in the same month last year. Overall household loan growth has eased, but demand for housing-related loans remains strong.

Looking only at mortgages shows a different trend. Mortgages rose 4.3 trillion won in August, a larger increase than 3.6 trillion won the previous month. Bank mortgages also increased to 4.0 trillion won from 3.5 trillion won. The drop in overall household loan growth was largely due to other loans, including unsecured credit loans, shifting from a 2.8 trillion won increase to a 1.7 trillion won decrease. That is why it is hard to say housing loan trends have stabilised based on the overall figure alone.

Financial authorities see increased home transactions ahead of the end of a grace period for heavier capital gains tax and the execution of balance loans tied to higher move-in volumes in July and August as factors behind the rise in mortgages. Over the past 5 years, the average increase in mortgages in September was 2.9 trillion won, above the monthly average of 1.9 trillion won. With the autumn moving season and demand for group loans also taken into account, analysis suggests the rise in mortgages could continue.

Financial authorities therefore decided to maintain the policy of total volume management of household loans by each financial company. The core of the policy this time, however, is that they will not bind all housing-related loans with the same intensity.

◆ Exceptions for supply funds; expanded support

Financial authorities decided to separately support funds needed in the actual housing supply process, while keeping the management stance on general household loans.

A key example is relocation loans. Financial institutions have completed talks to recognise relocation loans and similar products as exemptions from total volume management of household loans. The aim is to avoid a situation in which funds needed for redevelopment projects or housing supply are also blocked in the process of meeting total volume targets.

Financial authorities also urged that funds requiring policy support, such as promoting housing supply, stabilising youth housing and easing funding difficulties for end-users, be supplied without disruption.

The same direction is seen in project finance. PF capital ratio rules that had been set to apply to residential projects will be suspended for 2 years on a temporary basis. By contrast, rules will be introduced as scheduled from 2027 for non-residential projects, which have relatively higher delinquency rates. Rather than loosening regulation for all real estate PF, the approach is to reduce the regulatory burden by selecting projects directly linked to housing supply.

Supply funding itself will also be increased. Financial industry sectors are pushing to add to an in-house fund currently formed at 7.3 trillion won, and the securities industry plans to raise an additional 2.1 trillion won by year-end. KAMCO's PF normalisation support fund is also preparing additional resources of 500.0 billion won next year. Financial authorities are mobilising both regulatory exemptions and funding supply to ease supply-side financing difficulties.

Ultimately, the task appears to be where to draw the line between "curbing loans" and "expanding supply". If supply-related funds are blocked uniformly, it could conflict with the government’s policy to expand housing supply. But as exemptions widen, financial companies could face a bigger burden in managing both general household loans and policy-purpose funds within limited total volumes.

In particular, if demand for general mortgages rises again during the autumn moving season and group loans for supply purposes also expand, the need to meet both goals at the same time could become more pronounced. Household loan management could increasingly shift from how much to lend to the question of "which funds to allocate lending capacity to".

Financial authorities stressed that they plan to keep monitoring implementation of total volume management targets by each financial company, while regularising supply task review meetings once a week for the time being to examine whether financial support measures lead to an actual increase in housing supply.

A financial industry official said banks will need to manage their lending portfolios more closely because they must meet total volume targets while still providing supply and end-user funds that are needed for policy purposes without disruption.