Five Major Banks Saw Decrease in Credit Loans Last Month... Household Loan Growth Slows Down

[Asia Economy Reporter Park Sun-mi] Due to the banking sector's consecutive tightening of loans and interest rate hikes, the increase in household loans narrowed last month. However, with the second phase of the total debt service ratio (DSR) set to be implemented in January next year, there is demand to secure loans in advance until the end of the year, making it difficult to conclude that the household loan growth trend has completely stopped.

According to the five major commercial banks?KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup?the household loan balance at the end of last month stood at 706.3258 trillion won, an increase of 3.4381 trillion won compared to 702.8877 trillion won at the end of September. The increase was smaller than September's 4.0728 trillion won and similar to August's 3.5067 trillion won.

Among the five major banks, only Nonghyup Bank saw a decrease in household loan balances compared to the previous month. Nonghyup Bank implemented high-intensity measures such as suspending new mortgage loans to manage the total volume of household loans, but other banks experienced an increase in loan balances due to a "balloon effect."

The mortgage loan balance of the five major banks at the end of October was 501.2163 trillion won, up 3.7989 trillion won from 497.4174 trillion won at the end of September. Although this increase was smaller than the record monthly increase in September (4.0026 trillion won), it was similar to August's increase (3.8311 trillion won), indicating that the growth in mortgage loans has not yet been curbed.

However, credit loans at the five major banks showed a clear decline. The balance at the end of October was 140.8279 trillion won, down 171.9 billion won from 140.9999 trillion won at the end of September. This is interpreted as reflecting the banks' reduction of credit loan limits to annual income levels and the restriction of most overdraft account limits to 50 million won.

As the banking sector continues its consecutive tightening of loans, demand to secure loans in advance ahead of the January implementation of the second phase of DSR is expected to continue until the end of the year. Financial authorities have instructed commercial banks to manage this year's household loan growth rate at 5-6%, and next year, the target rate has been lowered further to around 4-5%. To curb the rapidly increasing household debt, starting January next year, the DSR 40% application will be expanded to borrowers with total loans exceeding 2 billion won, and from July, borrowers with loans exceeding 1 billion won will also be subject to DSR regulations. The individual DSR standard for the secondary financial sector will be tightened from the existing 60% to 50%, and the loan maturity applied in DSR calculations will be shortened, reducing loan limits.

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