Insurance companies challenge commercial banks by granting 40-year mortgages
SEOUL, July 5 (Korea Bizwire) — South Korea’s major insurance companies are challenging commercial banks by providing mortgages with terms of up to 40 years.
Kyobo Life Insurance Co., which already sells 40-year policy-type mortgage products for young people and newly married couples, is about to launch general-type product sales.
Beginning with Samsung Life Insurance Co. and Samsung Fire & Marine Insurance Co. in May, major insurance companies launched a series of 40-year mortgage products. Shinhan Life Co. is also expected to release these products in the third quarter of this year.
Under financial authority regulations aimed at stemming household loan growth, if the current total loan amount exceeds 100 million won ($77,120), annual principal and interest cannot exceed 40% of income. annual.
However, if the maturity date is extended, the amount of annual principal and interest is reduced, which leads to a reduction in the debt service ratio and creates room for more loans.
From a long-term perspective, insurance companies are less competitive than commercial banks in terms of loan interest rates.
Instead, non-bank financial companies, including insurance companies, have a debt service ratio (DSR) of 50%, 10 percentage points higher than that of commercial banks, resulting in a higher loan limit.
In particular, given the rise in interest rates on loans from commercial banks, which have narrowed the gap with those offered by insurance companies, the insurance industry expects to be able to attract more loan applications than before.
JS Shin ([email protected])