Household Credit Hits Record High Again in Q1... Sales Credit Records Largest Ever Decline

[Asia Economy Reporter Kim Eun-byeol] At the end of the first quarter this year, the household credit balance reached 1,611.3 trillion KRW, breaking the record once again. The increase in housing sales and jeonse (long-term lease) transactions sustained the growth in mortgage loans. Household credit refers to comprehensive household debt, including loans from banks and other financial institutions as well as pre-payment card usage amounts (sales credit). The increase during the first quarter was 11 trillion KRW, significantly smaller than the previous quarter's 27.7 trillion KRW. However, it expanded compared to the same period last year (3.2 trillion KRW).

According to the Bank of Korea's "Household Credit in the First Quarter of 2020" released on the 20th, as of the end of the first quarter, household loans stood at 1,521.7 trillion KRW, and sales credit was 89.6 trillion KRW. The total balance of 1,611.3 trillion KRW is the highest since statistics began in the fourth quarter of 2002.

The increase in household loans was 17.2 trillion KRW, a smaller increase compared to the previous quarter (23.1 trillion KRW), but larger than the same period last year (5.1 trillion KRW).

The growth in mortgage loans continued in the first quarter. Mortgage loans increased more than the previous quarter due to the rise in housing sales and jeonse transactions, while other loans saw a significant reduction in growth due to seasonal factors and a decrease in securities company credit loans. According to the Ministry of Land, Infrastructure and Transport, nationwide housing sales volume rose from 293,000 units in the fourth quarter of last year to 325,000 units in the first quarter of this year. Jeonse transactions increased from 300,000 units to 359,000 units during the same period.

Mortgage loans from deposit banks increased by 8.7 trillion KRW, while mortgage loans from non-bank deposit-taking institutions decreased by 2.8 trillion KRW. In the case of household loans from non-bank deposit-taking institutions, the decrease in mortgage loans expanded, turning into a decline (-2.3 trillion KRW).

Other financial institutions saw a decrease in other loans due to a reduction in securities company credit loans, but mortgage loans increased due to a rise in policy mortgage loan acquisitions by the Korea Housing Finance Corporation, expanding the increase from 5.6 trillion KRW to 6.6 trillion KRW.

Meanwhile, due to the contraction of consumer sentiment caused by the COVID-19 pandemic, sales credit from credit cards and installment finance companies' credit sales sharply decreased in the first quarter. The sales credit balance at the end of the first quarter was 89.6 trillion KRW, down 6.1 trillion KRW from the end of the fourth quarter last year. This is the largest decline since statistics began in 2003. Credit card credit sales account for about 70% of sales credit.

This content was produced with the assistance of AI translation services.