Banks' Choice: Lost Path of "Lifetime Repayment" 50-Year Home Mortgage Loans

According to financial authorities, the '50-year maturity home mortgage loan' is being identified as one of the major causes of household debt increase, prompting banks to explore countermeasures. As per sources within the financial sector, banks are considering options such as discontinuing the sale of 50-year maturity home mortgage products or imposing age restrictions like special interest rate loans, and some are even postponing product launch schedules.

 

Banks are facing a confusing situation due to the rise in household debt caused by 50-year maturity home mortgage loans.

 

Amidst these trends, NH Nonghyup Bank and BNK Kyungnam Bank have decided to halt the sale of 50-year maturity home mortgage products. NH Nonghyup Bank plans to temporarily suspend the sale of 50-year fixed and variable interest rate blended products from September, and BNK Kyungnam Bank has also temporarily suspended the sale of 50-year maturity home mortgage loans. Additionally, Sh Suhyup Bank and Daegu Bank have transitioned to offering 50-year maturity home mortgage loans exclusively to borrowers under the age of 34.

 

 

Woori Bank and Hana Bank are reportedly considering age restrictions for the 50-year maturity home mortgage product. Moreover, BNK Busan Bank is reevaluating its product launch schedule, while Shinhan Bank and Gwangju Bank have already introduced 50-year maturity home mortgage loans with age restrictions of under 50 years.

 

Even online banks are pondering solutions for this issue. KakaoBank is planning to offer 50-year maturity home mortgage loan products only to borrowers under 50 years old, and K Bank has temporarily postponed the launch of its 50-year maturity home mortgage product. Toss Bank is reported to have no current plans for launching a similar product.

 

Officials from the Bankers Association are awaiting guidelines from regulatory authorities, and based on these, each bank is expected to decide on its course of action. The Financial Supervisory Service announced its intention to conduct on-site comprehensive inspections targeting banks that handle household loans due to the increasing trend in household loan balances.

 

Furthermore, the financial authorities are also addressing the calculation maturity of 50-year maturity home mortgage loans. For instance, the contractual maturity of these loans may be shortened to around 30 to 40 years for calculations, which would lead to a higher Debt Service Ratio (DSR) when calculating the annual principal and interest repayments. DSR calculates the annual principal and interest repayments divided by annual income. With the reduction in calculated maturity, the increase in principal and interest repayments could lead to a higher DSR, potentially reducing the borrowing capacity.

 

Banks are facing a confusing situation due to the rise in household debt caused by 50-year maturity home mortgage loans. While it's true that the increase in demand for loans is partly due to the introduction of the 50-year maturity home mortgage product, other factors such as the recovery of the real estate market also contribute to the rise in household debt. A bank official mentioned, "The offering of 50-year maturity home mortgage loans by banks was mainly due to the increased demand for loans caused by rising real estate prices," adding that "this issue cannot be solely attributed to household debt."