Commercial Banks' Household Loans Increase by 6 Trillion Won in July... Mortgage Loans Show Highest Growth This Year

July Sees 6.2009 Trillion KRW Increase from Previous Month
Housing Loans Surge by 3.8237 Trillion KRW

Eun Sung-soo, Chairman of the Financial Services Commission, is attending the 13th Innovation Growth BIG3 Promotion Meeting held at the Government Seoul Office in Jongno-gu, Seoul on the 29th. Photo by Hyunmin Kim kimhyun81@

[Asia Economy Reporters Kiho Sung and Jinho Kim] Although the government announced strict management of the household debt growth rate, the outstanding household loans already approached 700 trillion won as of July. Since financial authorities have announced plans to manage the household loan growth rate at 5-6% in the second half of the year, it is expected that banks will tighten their household loan screening even further.

According to the five major commercial banks?KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup?at the end of last month, the total outstanding household loans amounted to 695.3082 trillion won. This is an increase of 6.2009 trillion won compared to 689.1073 trillion won in the previous month. The outstanding household loans have increased for two consecutive months following a slight decrease in May.

The growth in household loans was driven by mortgage loans. At the end of last month, the outstanding mortgage loans stood at 489.5837 trillion won, up 3.8237 trillion won from 485.7600 trillion won in the previous month. This is the largest increase this year, surpassing the 3.7579 trillion won increase in February. During the same period, jeonse (key money deposit) loans also rose by nearly 2 trillion won, from 116.3336 trillion won to 118.3063 trillion won.

Outstanding unsecured loans also increased by 1.8636 trillion won to 140.8930 trillion won from 139.0294 trillion won in the previous month. However, this increase did not reach the 6.8401 trillion won growth recorded at the end of April.

The banking sector attributes the rise in mortgage loan balances last month to the increase in housing prices. In particular, as both sale prices and jeonse prices rise, even if the number of loans remains the same, the total loan amount tends to increase. The increase in unsecured loans is analyzed to have been influenced by recent public offering subscriptions and the vacation season.

With household loans increasing, the financial authorities’ policy to target a 5-6% growth rate in household debt this year is expected to face significant pressure. Since the household debt growth rate in the first half of this year was 8-9%, the growth rate must be managed at 3-4% in the second half to meet the annual target.

However, considering that household loans in commercial banks increased significantly across all sectors, including mortgage and unsecured loans, last month, there are evaluations that the statement by Eun Sungsoo, Chairman of the Financial Services Commission, on the 28th of last month during the “National Address on the Real Estate Market” ? "We will do our best to curb household debt even if it means accepting some criticism and side effects" ? has become meaningless. There are criticisms that achieving this year’s household debt growth target has become practically difficult.

The so-called “balloon effect,” centered on the secondary financial sector, is also cited as a factor preventing financial authorities from achieving the household debt growth target. As financial authorities strengthen loan regulations mainly on commercial banks, low-credit and low-income individuals, driven into financial hardship by the prolonged COVID-19 pandemic, are rapidly turning to the secondary financial sector.

According to the Financial Supervisory Service and the financial sector, from January last year to the end of June this year, the net increase in household loans in the secondary financial sector?including insurance, credit cards, and savings banks?reached 33 trillion won. Especially in the first half of this year, the increase surged to nearly twice the total net increase of the previous year.

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