Loan Block Imminent... Advance Withdrawals and Remaining Funds in 'Parking Account' (Comprehensive)

Household Debt Increase Halved in One Month
Mortgage Loans Continue Sharp Rise
Demand Deposits, a Waiting Fund, Also Surge

[Asia Economy Reporter Park Sun-mi] As of last month, the increase in the base interest rate combined with strengthened household loan management measures caused the growth in household debt to be halved in just one month. Most of the money borrowed from banks flowed into parking accounts, which serve as temporary holding places for funds. This reflects the increase in financial consumers who took out loans in advance even if they did not immediately need them, as tighter household loan regulations are expected to spread comprehensively in the future.

According to the financial sector on the 2nd, the outstanding household loans at the end of August from the five major banks?KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup?stood at 698.8149 trillion won, an increase of only 3.5067 trillion won from 695.3082 trillion won at the end of July. This is about half of the net increase of 6.2009 trillion won recorded in July.

The sharp decline in household loan growth is largely due to banks raising loan interest rates and reducing credit limits, thereby strengthening credit loan management. The outstanding credit loans at the five major banks at the end of August were 140.8942 trillion won, increasing by only 1.2 billion won from 140.893 trillion won in the previous month. This contrasts sharply with July, when credit loan balances increased by 18.636 trillion won due to large-scale public offering subscriptions.

On the other hand, mortgage loans continued to increase.

The outstanding mortgage loans in August were 493.4148 trillion won, up 3.8311 trillion won from 489.5837 trillion won in July. This marks the largest monthly increase this year and the second consecutive month with growth approaching 4 trillion won, following July's increase of 3.8237 trillion won. This is interpreted as partly reflecting demand to secure housing funds in advance before the base interest rate hike is fully reflected, amid continued high housing sale and jeonse prices ahead of the autumn moving season.

Apartment prices in the Seoul metropolitan area have maintained the highest weekly growth rate for seven consecutive weeks since mid-last month. In the last week of August, apartment sale prices in the metropolitan area (Seoul, Gyeonggi, Incheon) rose by 0.40%. The average jeonse prices for apartments in the metropolitan area and nationwide last month were 441.56 million won and 323.55 million won, respectively, marking increases of 68.01 million won and 96.54 million won compared to July last year.

In fact, as NH Nonghyup Bank stopped accepting new mortgage loan applications as of the 23rd of last month and other banks began restricting loans, a mood formed among financial consumers to secure funds slightly earlier than planned to pay interim and final payments or to cover living expenses.

Demand Deposits Surge... Time Deposits Also Popular Amid Base Rate Hike

The psychology of wanting to borrow loans in advance while possible, combined with the government's strengthened loan regulations and increased uncertainty in domestic and international financial markets, led to a surge in demand deposits that can be withdrawn and deposited at any time. The outstanding demand deposits at the five major banks at the end of August were 685.1869 trillion won, a sharp increase of 11.5774 trillion won from the previous month. This is the exact opposite trend compared to July, when demand deposits decreased by 3.9728 trillion won.

When the base interest rate rises, banks immediately raise deposit interest rates, which also drove demand for time deposits. The outstanding time deposits at the end of August were 632.0696 trillion won, up 7.9422 trillion won from the previous month, marking the highest level in eight months. Woori Bank and Nonghyup Bank raised savings deposit interest rates by up to 0.30 percentage points and 0.35 percentage points respectively starting from the 1st of this month, and banks are collectively raising savings deposit rates this week.

An official from a commercial bank said, "Although the outstanding balance of credit loans did not increase significantly, the new loan amount doubled in one month," adding, "In August, when household loan management measures were intensively implemented, some consumers repaid debts due to interest rate hikes and loan limit reductions, while on the other hand, there was a surge in speculative demand to take out loans in advance."

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