Bank Household Loan Growth Widens from 1.9 Trillion to 3.5 Trillion Won... Credit Loans Lead the Increase

Bank of Korea Releases “Financial Market Trends in October 2025”
Bank Mortgage Loans Up 2.1 Trillion Won... Growth Slows from Previous Month
Credit Loans Surge on Pre-emptive Home Purchases and Stock Investment with Borrowed Money
“Overall Growth

In October, bank household loans increased by 3.5 trillion won, marking a larger rise compared to the previous month. Despite a reduction in the growth of mortgage loans, a significant surge in credit loans over the past month drove the overall increase in household lending. This was due to preemptive housing transactions ahead of the October 15 real estate regulations, combined with so-called "stock investment with borrowed money" demand. Other loans, which include credit loans, saw their largest monthly increase in four years and three months since July 2021.

According to the "Financial Market Trends in October 2025" released by the Bank of Korea on November 13, the outstanding balance of bank household loans at the end of last month stood at 1,173.7 trillion won, up by 3.5 trillion won from the end of the previous month. This represents a significant expansion in the increase compared to the previous month’s 1.9 trillion won rise.

The main driver behind the increase in bank household loans was other loans, which include credit loans. Last month, other loans increased by 1.4 trillion won, reversing the previous month’s decline. This is the largest monthly increase since July 2021, when it rose by 3.6 trillion won. Other loans include general credit loans, credit line loans (overdraft loans), commercial real estate-backed loans, deposit and savings-backed loans, and stock-backed loans. The Bank of Korea explained that the rise was mainly due to increased credit loans, which were driven by expanded domestic and overseas stock investment, preemptive housing transactions ahead of the October 15 measures, and increased demand for funds during the long Chuseok holiday.

Other loans had been on a prolonged decline due to the implementation of the Debt Service Ratio (DSR) regulation in 2022, but have shown a marked increase this year. From April to June, they increased by 1 trillion won each month for three consecutive months. However, the Bank of Korea noted that the scale and pace of the increase are not at a concerning level. Park Mincheol, Head of the Market Operations Team at the Financial Markets Department, said, "Looking at past figures, there have been times when the increase was much larger than last month," adding, "Given the high volatility, we do not see this as a situation linked to potential loan defaults." However, he also stated, "It is difficult to predict whether this trend is temporary or will continue, so the level of uncertainty is considered to be very high."

Mortgage loans increased by 2.1 trillion won, reaching 934.8 trillion won. Although the upward trend continued, the pace of increase slowed compared to September’s 2.5 trillion won rise. This was due to reduced demand for jeonse (long-term rental) loans and a slowdown in housing transactions during July and August. According to the Ministry of Land, Infrastructure and Transport, the number of apartment sales transactions in Seoul was 84,000 in July and August, down from 113,000 in June. Jeonse loans, which are included in mortgage loans, decreased by 300 billion won compared to the end of the previous month.

Park commented, "The growth of housing-related loans is slowing, so overall, the increase in household loans is also decelerating," adding, "After November, household loans may see a slight uptick due to increased housing transactions in September and October." He continued, "After the October 15 real estate measures, transaction volumes have dropped significantly, but typically after new regulations, the market tends to take a wait-and-see approach, so we need to monitor actual transaction trends more closely."

Corporate loans continued to rise for both small and large companies. At the end of last month, the outstanding balance of bank corporate loans was 1,366 trillion won, up by 5.9 trillion won from the previous month. Loans to large companies increased slightly by 200 billion won. Despite the reissuance of loans temporarily repaid at the end of the previous quarter, demand for operating funds decreased and companies utilized alternative financing methods, resulting in only a modest increase. Loans to small and medium-sized enterprises rose by 5.7 trillion won compared to the previous month, as major banks continued their lending activities and demand for value-added tax payments increased, leading to a larger overall rise.

In October, bank deposits fell by 22.9 trillion won from the previous month, mainly due to a decrease in demand deposits. This marks a sharp turnaround from the 31.9 trillion won inflow in the previous month. Demand deposits dropped by 39.3 trillion won in just one month as corporate funds temporarily deposited for quarter-end financial ratio management were withdrawn and due to value-added tax payments. Time deposits increased by 13.6 trillion won, as some household funds flowed out but some banks attracted deposits to manage regulatory ratios, and local government fiscal funds were temporarily deposited.

Deposits at asset management companies surged by 50.6 trillion won from the previous month, reversing the previous decline. Money market funds (MMFs) increased by 16.2 trillion won as corporate funds withdrawn at the end of the quarter were redeposited and surplus government funds flowed in, marking a sharp turnaround from the 28 trillion won decrease in the previous month. Equity funds increased by 22 trillion won, with both domestic and overseas funds seeing significant inflows. Other funds rose by 9.4 trillion won, and bond funds increased by 2.2 trillion won, continuing their inflow trend.

Meanwhile, yields on government bonds rose sharply for both three-year and ten-year maturities. As of November 12, the three-year bond yield stood at 2.92%, up 0.34 percentage points from 2.58% at the end of September. Over the same period, the ten-year bond yield jumped 0.33 percentage points from 2.95% to 3.28%. Park stated, "Due to heightened caution regarding financial stability and expectations for economic improvement, the pace of increase has accelerated since late October."