Gov’t measures cool off group loan demand

Group loans have shrunk to the lowest level in a year as a result of measures by the Moon Jae-in administration to cool off the real estate market.

According to the five major commercial banks - KB Kookmin, Shinhan, Woori, KEB Hana and NH Nonghyup - group loans at the end of February amounted to 116.9 trillion won ($108 billion). That’s 210 billion won or 0.18 percent less than the previous month.

It was the sharpest month-on-month drop since February 2017, when group loans fell 570 billion won compared to the previous month.

Group loans are offered to groups of borrowers looking to buy a number of units in newly built or redeveloped apartments. Financial institutions offer lower interest rates on them than individual mortgages to attract groups of borrowers.

They are different from individual mortgages in that the members of the group don’t have to go through individual credit checks. The bank looks at the credibility of the construction company building a development or redevelopment and the potential value of the apartments. The maximum amount to be borrowed and interest rates are determined by those factors.

In the last quarter of 2017, group loans were increasing. But in January the total amount of group loans fell 90 billion won compared to December.

Market analysts blame tougher government regulations such as Aug. 2 loan restrictions capping the maximum ratio on loan-to-value (LTV) and debt-to-income (DTI) at 40 percent.

Additionally, regardless of where the apartment is located, the LTV and DTI ratios see another 10 percent drop if there’s an existing mortgage held by the borrower on another property, which means the amount of money that can be borrowed shrinks.

“[The drop in group loans in February] not only reflects the fact that winter is not a popular season for pre-construction apartment sales, but also the effect of the government regulations,” said Park Won-gap, KB Kookmin Bank’s real estate senior analyst.

Park said an increase in the number of apartments struggling to find buyers contributed to the shrinkage in lending of group loans.

This is a contrast to individual mortgages, which have seen an increase. The balance of individual mortgages at the five commercial banks at the end of last month was 380.3 trillion won, 1.55 trillion won or 0.4 percent more than the previous month.

BY LEE SAENURI [lee.hojeong@joongang.co.kr]