Korean internet-only banks rapidly expand housing mortgage loans

[Image source: Gettyimagesbank]

South Korea’s internet-only banks are rapidly expanding their loan business by offering housing mortgage loans at lower interest rates.

According to sources from the financial sector on Wednesday, the outstanding balance of the won-denominated loans extended by the country’s three online banks is projected to reach 53.9 trillion won ($41.4 billion) in the second quarter of this year, up 35.4 percent from a year ago and 6.6 percent from the previous quarter.

KakaoBank Corp, the country’s first online lender, is expected to see won-denominated loans increase by more than 16 percent to over 31 trillion won during the cited period.

K-Bank saw its loan balance soar 45.5 percent to 12.7 trillion won in the second quarter from 8.73 trillion won a year ago, up 45.5 percent.

Toss Bank, the latest player, also more than doubled its loan balance from 4.29 trillion won from last year.

The outstanding balance of loans extended by the country’s four major banks, on the other hand, stood at 1,159.68 trillion won at the end of June, up by a mere 2.86 percent from a year ago. The four banks are KB Kookmin, Shinhan, Hana, and Woori.

In terms of loan growth, the three internet banks’ loans are about 12 times higher than those of the four major banks.

The increase in internet banks’ loans is largely due to their aggressive expansion into the housing mortgage market.

The internet banks have been launching housing-related loan products since last year and have been engaging in various marketing activities, including interest rate discounts, to attract customers even amid rising market interest rates.

[Courtesy of KakaoBank]

In April, KakaoBank expanded its target for mortgage loans to include townhouses and multi-unit houses in addition to apartments and conducted a special sale with discounted interest rates until the end of last month.

The bank’s average interest rate for mortgage loans handled in May was the lowest among all banks, at an annual rate of 3.88 percent, and it remained the only product in the upper 3 percent range last month.

Among those who took out loans for the purpose of purchasing a home at the end of June, 44 percent were first-time customers. Among the borrowers who took out mortgage loans at KakaoBank, 82 percent were in their 30s and 40s.

The proportion of customers who switched from other banks to KakaoBank among all new mortgage customers also increased to 54 percent in the second quarter of this year from 28 percent in the fourth quarter of last year. This shows that borrowers who want to reduce their interest burdens or move to a better home flocked to KakaoBank.

This year, K-Bank has lowered its interest rates on both jeonse loans, or loans for long-term housing rental deposits, and mortgage loans four and five times, respectively, in order to increase its interest rate competitiveness by effectively lowering its lending rates by the amount of the increase in market interest rates.

The share of mortgage loans in K-Bank’s loan balance increased nearly 30 percent in the second quarter of this year from 14.5 percent at the end of last year.

Toss Bank has recently started hiring new personnel to accelerate the launch of its jeonse loan product. Industry observers expect that the joint loan program that Toss Bank is promoting in collaboration with Kwangju Bank will also start with credit loans and expand to housing-related loan products.