Collective loans for new homes lead mortgage gain in H2

Seoul, Jan. 26 (Yonhap) -- Collective loans banks offer new apartment buyers rose sharply in the second half of last year, leading growth in total mortgage loans, official data showed Tuesday.

Outstanding collective loans extended by local commercial banks totaled 110.3 trillion won (US$91.8 billion) as of end-2015, up 10.1 trillion won from six months ago, according to data by the Bank of Korea and the Financial Services Commission (FSC) on Tuesday. The total excludes "policy" mortgage loans by state-run Korea Housing-Finance Corp.

The growth of collective loans accounted for 34 percent of the banks' total mortgage growth of 29.7 trillion won during the same period.

Considering that the share of collective loans out of total outstanding mortgage loans was 27.5 percent at the end of last year, collective loans led the growth in total mortgage loans.

The sharp growth in collective loans was due to the increase in loans for middle payments by apartment buyers with brisk sales of new apartments in the cited period. Total outstanding mortgage loans at banks were 400.8 trillion won at the end of 2015.

Difficulties in finding rented homes and an upsurge of deposits for rented homes drove people to opt to buy new apartments with collective loans.

Buyers of new apartments can draw 60 to 70 percent of the apartment price as a collective loan that banks offer under contracts with apartment builders. After the apartments are constructed and the owners move into them, collective loans are changed to individual mortgage loans.

The amount of collective loans that have been approved by banks but are yet to be implemented totals 50 trillion won, predicting that such loans will further increase this year, banking industry sources said.

As the collective loans rapidly rose, banks strengthened the requirements for new borrowers starting in October last year.

Financial authorities, however, do not have plans to directly control the banks' collective loans considering the possible negative impact on the apartment market that the control will bring.

FSC Chairman Yim Jong-yong said the commission is not considering making new restrictions on collective loans, noting that it is a matter for banks to do proper risk control on collective loans.
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