As bank household lending rose by the most in a year, banks are again raising the bar for mortgages. Self-imposed curbs are spreading, including smaller mortgage limits and suspending applications via loan brokers and mortgage insurance. Financial authorities also began checking overall household debt management by separately summoning regional banks, after calling in major commercial banks.

KB Kookmin Bank will cap the maximum home purchase loan at 300 million won from July 10 until further notice, the financial sector said on July 13.

The limit for home purchase loans in the Seoul metropolitan area and regulated zones fell to a maximum of 300 million won from 600 million won. Homes priced above 2.5 billion won can be financed only up to 200 million won.

Areas outside the Seoul metropolitan area and regulated zones, which previously had no separate ceiling, will also face a new cap of 300 million won. Group loans such as for interim payments, relocation costs and final payments, as well as fund-backed loans, Bogeumjari loans and loans for home purchases and auction funding for victims of rental fraud, are excluded from the restriction.

KB Kookmin Bank introduced its own standard that is lower than the 600 million won ceiling applied to the Seoul metropolitan area and regulated zones under last year's June 27 property measures, further tightening lending across the banking sector.

Shinhan Bank stopped accepting new mortgage applications through loan broker channels from July 8. The step aims to control the pace of household loan growth by blocking demand that flows in through brokers rather than branches.

Suspensions of mortgage insurance are also spreading across the banking sector. Following KB Kookmin Bank, Hana Bank, NH NongHyup Bank and BNK Kyongnam Bank, Shinhan Bank also temporarily halted new mortgage insurance sign-ups from July 10.

Bank household loans rise 760 billion won, biggest increase in a year

Banks' lending restrictions are seen as a response to a renewed widening of household loan growth. Total household loans across the financial sector rose by 830 billion won last month, according to the Financial Services Commission.

Bank household loans increased by 760 billion won, expanding the monthly gain by 70 billion won. It was the biggest increase since 620 billion won in June last year, the largest in a year.

Mortgages in particular led the rise in bank household loans. Across the financial sector, mortgage growth rose to 450 billion won in June from 400 billion won in May. Bank mortgages also expanded by 110 billion won over the same period, rising to 430 billion won from 320 billion won.

Financial authorities believe pressure for mortgage growth could persist for the time being as recently increased home transactions feed into loan disbursements with a time lag.

Typically, it takes 2 to 3 months after a home sales contract for a mortgage to be disbursed, meaning increased transactions before the end of a grace period on heavier capital gains taxes can be reflected in future loan statistics.

Authorities summon regional banks after major banks, check total lending management

Financial authorities are expanding the scope of household debt management from major commercial banks to regional banks.

The Financial Services Commission separately summoned regional banks on July 10 to review progress in meeting household debt management targets and second-half management plans. It called in regional banks, which do not participate regularly in standing meetings, to examine management conditions.

Financial authorities are known to have judged that some regional banks failed to sufficiently control the pace of household lending growth in the second quarter. The average target for this year's household loan growth rate assigned to regional banks is around 4 percent. Authorities are seen as having launched a separate review out of concern about lending growth.

Regional banks have smaller household loan balances than major commercial banks, but rapid growth could lead them to use up annual management targets early. Some analysts say authorities began oversight by also considering the possibility that borrowers could shift demand to regional banks as major commercial banks raise lending hurdles by cutting internal limits and restricting broker channels.

Financial authorities are urging financial firms to review second-half business strategies and monthly and quarterly management plans again to ensure they can meet annual household loan management targets. With banks cutting mortgage supply on their own and authorities widening the oversight net to regional banks, household lending requirements are expected to become tougher in the second half.

A banking sector official said, "Major commercial banks are implementing various measures for total lending management, while moves at regional banks have been relatively less visible, so it seems they were summoned." The official said, "It appears to be aimed at checking whether management targets are being properly met, along with preemptive moves to prepare for a concentration of loan demand."