Seoul Puts Cap on Home Mortgage Loans

Bank mortgage loans have been capped.

To control housing prices, the Financial Supervisory Service (FSS) has put a brake on mortgages by setting limits on bank home loan mortgages.

According to the financial world on November 17, the FSS asked the heads of four central banks (Kookmin, Shinhan, Woori, and Hana) and the banking CEO of the National Agricultural Cooperation Federation to halt the heated competition over mortgages, while capping November’s amount of loan increase for each bank.

Sources within banks said, “We heard the FSS unofficially set a limit for each bank. For instance, the loan limit for big banks such as Kookmin and Shinhan is 500 to 600 billion won.”

This month’s mortgage loans are likely to stop or be made only to those who already made contracts to buy houses, as most banks’ transactions this month have reached or passed the limit.

FSS Vice Governor Kim Jung-hoe explained, “We asked heads of banks to stop competition over mortgages but didn’t impose a cap.”

However, those in the banking industry view it as a move to control the total amount of mortgage loans through “window control” as a way to rein back soaring house prices.

On the other hand, the government and the Uri Party decided to hold off on the review the plans of opening private apartment sale prices to the public and of improving the bond bidding system through the “apartment sale price improvement committee” until next February in a government-ruling party consultation session held on the same day.

jarrett@donga.com sanhkim@donga.com