Delinquent group loans nearing the 2% level

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Delinquent group loans nearing the 2% level

The delinquency rate for group loans provided by 18 local banks neared 2 percent in end-January, a record since data was first compiled by the government at the end of 2010, the financial watchdog said.

Group loans are taken out by two or more investors, usually to buy property. According to the Financial Supervisory Service (FSS) yesterday, the delinquency rate for group loans stood at 1.98 percent in January, up 0.47 of a percentage point from December 2012. This has pushed up the overall mortgage loan delinquency rate to 0.94 percent at the end of January, up 0.2 of a percentage point from a December record. Group loans are estimated to account for 33.5 percent of all mortgages in Korea.

The FSS said the delinquency rate has surged due to lawsuits by real estate investors who refuse to repay loans after suing banks and developers. Many are demanding refunds of their deposits and cancellation of their contracts with developers after the prices of newly built apartments fell up to 40 percent compared to when they signed the contract to purchase them three to four years ago.

Overall outstanding domestic bank loans - including corporate and household loans - totaled 1,107 trillion won ($1.02 billion) at the end of January, up 0.7 trillion won from a month earlier.

Loans provided to large companies stood at 158.4 trillion won in January, up 1.7 trillion won from December, while loans provided to small- and medium-sized enterprises totalled 464.5 trillion won in January, up 3.2 trillion won from a month earlier.

Banks’ outstanding household loans slipped 3.4 trillion won to 461 trillion won in January as demand for household loans fell after the government’s temporary halving of the acquisition tax from 4 percent to 2 percent concluded at the end of 2012. Out of 461 trillion won, 312.7 trillion won was mortgages.

The financial watchdog said the Korean economy is on track to recovery thanks to growing exports from the U.S. and emerging markets, but it noted risk factors such as spending cuts in developed countries, heightened uncertainty about Japan’s economic policy and continued slump in the domestic real estate market.

“The FSS will strengthen monitoring of vulnerable sectors such as household debt while encouraging banks to clean up delinquent loans,” said an official at the FSS.

By Kim Mi-ju []
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