"Household Loan Growth Slows Temporarily... Trend Continuation Needs Monitoring"

"Situation with High Uncertainty Regarding Persistence and Intensity"

Household Loan Increase and Growth Rate

[Asia Economy Reporter Park Sun-mi] Household loans have somewhat decreased in growth scale due to strengthened management of the increase by the government and financial institutions, as well as rising interest rates, but the trend's continuation requires further observation, according to an analysis.

According to the Bank of Korea's Monetary and Credit Policy Report (December 2021) on the 12th, household loans are expected to continue the current slowdown trend for the time being, considering the financial sector's strong management of growth and the seasonal off-season. This is because from next year, the 2nd and 3rd stages of the Debt Service Ratio (DSR) regulations will be applied, and strengthened household debt management by banks may continue to act as a factor suppressing the increase in household loans.

The rise in interest rates is also expected to affect reducing the scale of household loan increases by raising borrowers' interest burdens. The Bank of Korea, which raised the base interest rate twice in August and November this year, stated that the interest rate level is "still accommodative" and has announced additional hikes next year.

However, the Bank of Korea holds the view that since loan demand remains high and loans with less regulatory impact such as jeonse deposit loans and group loans are expected to continue increasing, it is necessary to observe further whether the household loan slowdown trend will persist after next year.

The report stated, "Although the recent rise in household debt growth rate and housing prices has somewhat eased, there is high uncertainty regarding the sustainability and strength of this trend," adding, "It is necessary to closely monitor related trends and continue to pay attention to the accumulated risks of financial imbalance."

Meanwhile, last month, bank household loans amounted to 1,060.9 trillion won, increasing by only 3 trillion won compared to October. This is about half of the 5.2 trillion won increase in October. Mortgage loans increased by 2.4 trillion won to 776.9 trillion won, with the increase halving from October's 4.7 trillion won. The increase in bank jeonse deposit loans was limited to 2 trillion won, and the balance of other loans including credit loans rose by 500 billion won to 282.9 trillion won.

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