Banking Sector Household Loan Growth Slows... Will Loan Suspension Be Avoided?
[Asia Economy Reporter Kiho Sung] The increase in household loans in the banking sector has eased since October. As a result, predictions suggest that a complete halt to loans by the end of the year can be avoided.
According to the financial sector on the 31st, the outstanding balance of household loans at the five major commercial banks (KB Kookmin, Shinhan, Hana, Woori, NH Nonghyup) as of the 28th was 705.6783 trillion KRW. This is an increase of 2.7905 trillion KRW compared to the end of the previous month. The household loan balance at the five major commercial banks had increased by about 3.5 trillion KRW in August and about 4 trillion KRW in September, but the growth slowed this month.
This decline is believed to be due to the rise in market interest rates. According to the Korea Financial Investment Association, the one-year bank bond rate, used as the benchmark interest rate for bank credit loans, rose from 1.236% per annum at the end of June to 1.688% on the 28th. The COFIX rate, which is the benchmark interest rate for new housing mortgage loans in September, is 1.16% per annum. This is 0.24 percentage points higher than at the end of June and is the highest since April last year.
The banking sector expects that if this trend of increase continues, the worst-case scenario of a complete halt to bank loans by the end of the year can be avoided. Considering the total household loan target of 6.99% for the five major banks, the remaining loan capacity is estimated to be about 11.3 trillion KRW. If the current growth rate continues, the financial authorities' target can be met.
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In addition, measures to reduce the increase in loans are being introduced one after another. NH Nonghyup Bank recently drastically reduced the credit loan limit from the previous 100 million KRW to 20 million KRW. Along with this, it decided to waive all early repayment fees on household loans until the end of the year. Woori Bank also recently removed preferential interest rates on credit loans and housing mortgage loan products.
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