|A customer speaks with a bank clerk at a Hana Bank loan sales office in Seoul in this file photo. /Yonhap|
By Lee Min-hyung
The nation's loan market is in a growing state of confusion, with more and more people rushing to borrow from banks ahead of the government's planned implementation of toughened debt-service-ratio regulations.
Under the new regulation, those who earn more than 80 million won ($71,700) annually will not be able to receive non-collateralized credit loans over 100 million won when buying real estate. This will take effect as of Nov. 30.
The regulation has sparked a sense of anxiety among households over a possible introduction of much tighter restrictions on loans.
For about a week after the Financial Services Commission (FSC) announced the plan on Nov. 13, more people have borrowed money from banks.
According to data from the nation's top five lenders ― such as KB, Shinhan, Woori, Hana and NongHyup ― their loan balance surged by more than 1 trillion won only four days after Nov. 12, a day before the regulation was announced.
Financial authorities have been toughening loan regulations to block people from borrowing too much money to purchase apartments, viewing the move as real estate speculation.
But apartment prices in Seoul and its surrounding cities have risen steeply every time such a regulation has been implemented. This has ended up creating a nationwide boom of binge buying of apartments particularly among young people, most of whom believe prices will keep rising unless the government stops introducing regulations.
Regulators also ordered banks to control household debt and press lenders to offer less to households.
"We have no choice but to follow guidelines and orders from authorities," a bank industry official said. "Even if the introduction of such loan regulations is not good for our profitability, we need to abide by the regulation."
The binge borrowing is expected to continue throughout next week before the regulation goes into effect by the end of this month.
"Even homeowners consider taking credit loans hurriedly amid concerns that regulators will toughen restrictions on borrowing money at least for the next few months," a Seoul-based office worker said.