Household Debt Hits 1,765 Trillion Won... Largest Quarterly Increase Ever Amid 'Debt Investment' Craze

Bank of Korea 'Household Credit (Provisional) for Q1 2021'
Increased by 37.6 trillion in Q1... Largest quarterly increase on record

[Asia Economy Reporter Kim Eunbyeol] As of the end of the first quarter this year, the household credit balance reached 1,765 trillion won, an increase of 37.6 trillion won compared to the previous quarter. This marks the largest increase ever recorded for a first quarter, influenced by steady demand for housing-related loans and a rise in borrowing to invest in stocks and other assets.

According to the "Household Credit (Provisional) for Q1 2021" released by the Bank of Korea on the 25th, the household credit balance at the end of the first quarter was 1,765 trillion won, up 37.6 trillion won from the previous quarter. Although the increase was smaller than the 45.5 trillion won rise in Q4 of last year, it was significantly larger compared to the 11.1 trillion won increase in the same period last year. When comparing the increase in household credit for first quarters historically, this is the largest scale increase.

The household credit growth rate was 9.5%, continuing an upward trend for six consecutive quarters since Q4 2019.

The household loan balance stood at 1,666 trillion won, increasing by 34.6 trillion won from the previous quarter. Although the increase in household loans was smaller than the 45.8 trillion won rise in the previous quarter, it was significantly larger compared to the 17.3 trillion won increase in the same period last year. The increase in household loans was also the largest among first quarters historically.

By product, mortgage loans increased by 20.4 trillion won, maintaining a similar scale to the previous quarter, while other loans recorded an increase of 14.2 trillion won, down from 25.5 trillion won in the previous quarter due to credit loan regulations and active management efforts by financial institutions focusing on credit loans. However, compared to the same period last year (1.9 trillion won), other loans surged sharply.

Song Jaechang, head of the Financial Statistics Team at the Bank of Korea's Economic Statistics Bureau, explained, "Mortgage loans steadily increased due to demand for funds related to housing sales and jeonse (long-term deposit lease) transactions, and the increase in other loans also expanded compared to last year. In the first quarter of last year, loan demand was low due to the outbreak of COVID-19, but as the pandemic prolonged, demand for living expenses increased, and many people borrowed to invest in stocks."

By financial sector, other financial institutions maintained an increase of 10.3 trillion won, similar to the previous quarter. In contrast, deposit banks saw their increase shrink from 28.9 trillion won in the previous quarter to 18.7 trillion won, and non-bank deposit-taking institutions decreased from 6.6 trillion won to 5.5 trillion won.

Meanwhile, sales credit during the first quarter turned positive with an increase of 3.1 trillion won compared to the previous quarter's decrease of 200 billion won, mainly driven by credit specialized companies as the consumption slump caused by COVID-19 eased.

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