[DigitalToday reporter Lee Ji-young] As financial authorities tighten household debt management and banks respond to aggregate lending caps, lending restraint is taking effect, but both banks and consumers are left sighing. Critics say banks face weaker profitability and the burden of tighter regulation, while consumers are struggling to secure funds they actually need.

As of Dec. 11, major commercial banks have recently rolled out a series of loan restrictions to respond to the second-half aggregate lending cap, the financial sector said.

KB Kookmin Bank has stopped taking new mortgage loans this year, except for loans meant to return lease deposits. From Dec. 4 it also blocked mortgage loans for living-stability funds. Concerns were raised that such loans are subject to the aggregate cap and could in effect be used as a means to buy real estate.

Hana Bank has also stopped accepting in-person branch applications for mortgage loans and jeonse loans to be executed within this year, starting on Nov. 25. Shinhan Bank has halted new mortgage loan applications through loan brokers, and Woori Bank is adjusting overall volume by limiting household loan caps by branch.

For banks, shrinking loans leads directly to lower interest income, adding to pressure on profitability. A higher floor for mortgage risk weights, which takes effect from January, is also increasing the burden.

The risk weight for mortgage loans, currently 15 percent, will rise to 20 percent from next year. Even if banks handle the same amount of credit, required capital will increase, leaving banks with even less capacity to supply mortgage loans.

The problem is that the impact of the aggregate cap is being passed on directly to end-users. Financial consumers have been unable to clear higher loan hurdles and have been turning their attention to second-tier financial institutions, data showed.

In particular, year-end is a period when moving demand concentrates and mortgage lending rises, while unsecured loans increase on demand for urgent cash. Consumers say the loan cliff they feel is becoming deeper.

In data released by financial authorities on Dec. 10, household loan growth across the financial sector in November totalled 4.1 trillion won, down 800 billion won from the previous month. Growth at banks in particular fell from 3.5 trillion won to 1.9 trillion won, nearly halving. But growth at second-tier financial institutions expanded to 2.3 trillion won. With the door narrowing at banks subject to tighter aggregate caps, demand effectively shifted to non-bank lenders.

Park Min-cheol, deputy head of the Bank of Korea's market coordination team, said mortgage loan growth shrank sharply as banks strengthened controls despite higher home transaction volumes before the Oct. 15 measures. He said demand for jeonse funds also eased, acting as a factor that lowered overall growth. He analysed that while the pace of price rises across the Seoul metropolitan area has slowed, close monitoring is needed as some core areas are still slow to cool.

He added that demand for housing-related loans remains intact, so even if the slowdown in growth continues due to seasonal factors such as early-year bonus inflows and the cleanup of non-performing loans, fundamental pressure remains.

Banks expect the lending environment will remain challenging next year. With capital burdens rising and aggregate caps likely to continue, capacity to supply loans is expected to shrink further. Financial consumers are also growing more anxious, as higher barriers at banks would leave them little choice but to head to non-bank lenders.

A banking industry official said the effect of restraining household loans has appeared, but both banks and financial consumers are struggling. The official said the policy intent is understood, but discussions are needed to keep improving measures in a way that raises effectiveness and protects end-user financial consumers.