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| A pedestrian walks past a sales office of NongHyup Bank in Seoul, Sunday. The bank recently decided to suspend sales of a mortgage loan product with 50-year maturity after the government gestured to toughen regulatory pressure on rising household loans. Yonhap |
Insurers rush to launch mortgage loans with 50-year maturity
By Lee Min-hyung
Leveraged investments are regaining vigor in the capital market amid lingering fears that asset price bubbles may end up bursting due to macroeconomic uncertainties.
According to data from the Korea Financial Investment Association, the credit transaction balance on the Korean stock market reached this year's new high of 20.55 trillion won ($15.3 billion) on Aug. 17. The figure shows the amount of leveraged stock investments in the benchmark KOSPI and secondary Kosdaq markets.
This was prompted by retail investors who went on a buying spree of volatile secondary battery shares. Most of them jumped into the frenzied buying of the shares on fears of missing out, with the value of some large-cap battery-linked stocks ― such as EcoPro and POSCO Holdings ― soaring at an alarming pace from the beginning of the third quarter.
But the rising credit balance sparks concerns that investors may end up losing more when the market enters a path for readjustment again amid unceasing woes over the global macroeconomic uncertainty.
The main bourse extended a rally close to the 2,700-point mark in early August, boosted by the secondary battery-driven capital inflow. The momentum soon lost steam as red-hot stock prices went into a downward spiral. The KOSPI fell to 2,500 points as of Friday and is feared to extend further losses on reviving global financial risks triggered by Chinese developer Evergrande's bankruptcy.
Even if the Bank of Korea (BOK) de facto ended its rate hike cycle, the central bank does not send any immediate signs of a rate cut anytime soon. As the interest rate remains at a high level, the possible collapse of once-promising shares may incur huge losses to investors.
Investors' buying spree is not limited to the stock market. The housing market also looks to attract more capital from investors after major commercial lenders launched mortgage loans with a 50-year maturity. Up until the early 2020s, the maturity of Korea's mortgage loans was around 30 to 35 years. But the government launched a 40-year maturity loan product for newlyweds and young people, as part of a policy-wide effort to alleviate their monthly housing burden amid rapidly rising apartment prices.
After the recent launch of the 50-year maturity mortgage loan, households are rushing to purchase homes. According to data from the nation's five major lenders, households took out the loan product worth 1.23 trillion won as of Aug. 10, almost a month after its launch. But after NongHyup Bank suspended sales of the product on Aug. 19, other financial groups ― such as insurers ― are jumping on the bandwagon by releasing similar mortgage loans.
This month alone, Samsung Life Insurance and Samsung Fire & Marine Insurance ― two leading life and non-life insurers here ― launched 50-year-maturity mortgage loan products in their preemptive move to absorb growing demand from the market.
"Demand for the mortgage product is expected to remain strong, as lenders can reduce their financial burden at this period of steep price rise. On top of that, housing market sentiment is showing signs of recovery, as was shown by rising transaction volume," a financial industry source said.
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