Issuing of non-mortgage loans rises in October

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Issuing of non-mortgage loans rises in October

The amount of non-mortgage loans extended by local banks increased at a sharp pace last month as a new set of loan guidelines on mortgages took effect, industry data showed Sunday.

According to the data, the outstanding balance of non-mortgage loans, including lending through overdraft lines of credit, from five major commercial banks including Shinhan Bank and Kookmin Bank reached a combined 101.2 trillion won ($90.5 billion) as of the end October, up 2.1 trillion won from a month earlier.

The on-month gain is the sharpest in the last 12 months, surpassing a 1.3 trillion won rise in May.

Insiders said people were trying to get bank overdrafts before the so-called debt service ratio (DSR) regulation became mandatory from Oct. 31.

The DSR, which gauges the amount a borrower must pay in principal and interest in proportion to yearly income, is one of the main barometers the government looks at in monitoring household loans.

A ratio of 70 percent or over is categorized as a risky loan, while one over 90 percent constitutes a high-risk loan.

The DSR was initially designed to control home-backed mortgage loans and reduce the country’s massive household credit, which reached nearly 1,500 trillion won as of the end of June.

Moreover, the government had local lenders apply the DSR regulations to non-mortgages as well as part of its efforts to cool down the overheated real estate market.

Meanwhile, home-backed mortgages given out by the five banks rose by 2 trillion won last month, slowing down from a 2.6 trillion won gain in September and a 2.9 trillion won increase in August.

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