FSS chief slams banks for raising mortgage rates, hints at intervention
Published: 25 Aug. 2024, 17:29
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- JIN EUN-SOO
- jin.eunsoo@joongang.co.kr
![Financial Supervisory Service Gov. Lee Bok-hyun speaks during a meeting at NH Nonghyup Bank headquarters in Jung District in central Seoul on Friday. [YONHAP]](https://koreajoongangdaily.joins.com/data/photo/2024/08/25/4cb30791-bdd3-4061-9d8d-7682fc1c6a96.jpg)
Financial Supervisory Service Gov. Lee Bok-hyun speaks during a meeting at NH Nonghyup Bank headquarters in Jung District in central Seoul on Friday. [YONHAP]
Korea's financial regulator hinted at intervening in the real estate market of the greater Seoul area to curb mortgages while slamming local banks for raising interest rates, which could bring about market distortion.
"The latest increase in borrowing costs by local banks is not what we wanted," said Lee Bok-hyun, governor of the Financial Supervisory Service (FSS), on a TV talk show Sunday morning.
"We have made minimal interference for the sake of banks' autonomy, but we feel the need to intervene more strongly considering the real estate market situation in the future."
Local banks have upped their interest rates this year amid pressure from the financial authorities to control relentlessly rising household debt.
Household loans in Korea reached 1,780 trillion won ($1.34 trillion) as of the end of the second quarter this year, 13.6 trillion won more than the end of last year, according to Bank of Korea data. Most of the addition derived from a rise in mortgage loans.
"Banks saw more household loans than what was expected from earlier this year and they responded to this by raising interest rates, which easily results in more profit while downsizing [loan] demand," Gov. Lee said.
He added that what the government actually wanted was for the banks to "manage [loan] portfolios preemptively" instead of simply raising the rates.
Domestic banks saw their interest income reach an all-time high of 29.8 trillion won in the first half of this year, FSS data says, a 1.4 percent increase from the previous year.
A consequent hike in borrowing rates at first-tier banks led their lowest mortgage rate to come in at 3.65 percent while that of second-tier banks such as insurance companies came to 3.19 percent, according to local reports.
"There is some kind of market distortion," the FSS chief said.
"It is not right for the banks to raise the rate instead of managing loan accounts or rolling out suitable micromanagement."
Lee hinted at introducing additional measures to curb the heated real estate market.
"It won't just be fixed by the stressed debt service ratio," he said in reference to the government's loan limit system, adding that if the market shows no sign of cooling down after September, the regulator is reviewing taking stronger measures.
Real estate transactions in the greater Seoul area saw a nearly twofold increase in the first six months of this year as 21,888 apartments were sold in June in the region compared to 12,083 in January.
BY JIN EUN-SOO [jin.eunsoo@joongang.co.kr]
with the Korea JoongAng Daily
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