Go to Contents Go to Navigation

Banks likely to tighten screening for household mortgages in Q3: BOK

All News 12:00 July 05, 2018

SEOUL, July 5 (Yonhap) -- South Korean lenders will likely continue to strengthen their screening for household mortgages in the next three months, though the rate of such tightening shows signs of easing, amid government-led measures to cool down the overheated housing market, central bank data showed Thursday.

The overall index measuring banks' "attitude" toward extending home-backed loans to households came to minus three for the July-September period, compared with minus 20 a quarter earlier, according to the data by the Bank of Korea (BOK).

A reading below zero means banks will implement tougher screening for loans, while a reading above zero means eased lending requirements.

The BOK said banks' attitude index on demand for fresh non-mortgage loans is likely to reach seven in the third quarter, turning around from minus three in the previous quarter.

The new debt service ratio (DSR) rules will go into effect in the latter half of this year after a trial period of several months. Under the tightened DSR guidelines, lenders will check borrower's monthly debt obligations including overdraft bank accounts and credit card loans, making it harder for people to take out fresh loans.

It is part of the government's efforts to slowdown the rapid growth pace of household credit, which surpassed 1,460 trillion won (US$1.32 trillion) in March.

The BOK data also showed that local lenders' stance toward fresh loans to big firms came to zero in the third quarter, while the attitude toward small and mid-sized companies improved to 13 for the next three-month period.

Separately, indices measuring the credit risks of large firms rose to seven from three for the July-September quarter, while an index measuring the credit risks of households reached 33 during the cited period, up from 27 three months earlier.

The quarterly BOK reading was based on a survey of 15 banks and 184 nonbank lenders from May 25-June 8.

Banks likely to tighten screening for household mortgages in Q3: BOK - 1


Send Feedback
How can we improve?
Thanks for your feedback!