Household Loans to Reach Up to 97 Trillion Won This Year... Decrease of 13 Trillion Won Compared to Last Year

Managing Household Loan Total Growth Rate Target at 4-5%
Strengthening Debt Service Ratio (DSR) Regulations by Borrower

[Asia Economy Reporter Oh Hyung-gil] Due to the financial authorities' strengthened management of household debt, the increase in household loans this year is expected to be capped at around 97 trillion won. This could mean a reduction of more than 13 trillion won compared to the previous year, making it difficult to obtain household loans.

According to the financial authorities' preliminary figures and forecasts on the 2nd, the outstanding balance of household loans as of the end of last year is estimated to be around 1,628 trillion won. This represents an increase of about 110 trillion won (7.2%) compared to the balance at the end of 2020.

A Financial Services Commission official stated, "Although the year-end figures have not yet been finalized, the increase in household loan balances last month is expected to be less than half of that in the previous month (November last year)." According to the Financial Supervisory Service's preliminary figures for November last year, the increase in household loans was 5.9 trillion won.

The household loan growth rate last year is expected to be about 0.8 percentage points (p) lower than in 2020. In 2020, household loans increased by 112.3 trillion won, or 8.0%.

The financial authorities aimed to manage last year's household debt growth rate at around 5-6%, but the growth rate exceeded 7% due to measures such as excluding jeonse loans from total volume management and continuing to supply group loans as part of 'real demand' policies.

Until July last year, the monthly average increase in household loans exceeded 11 trillion won, but the growth rate slowed after August, when the financial authorities implemented strong total volume management.

Furthermore, considering the outstanding balance of household loans at the end of last year and the financial authorities' target growth rate of 4-5% for this year, the supply volume is expected to be in the range of 65 trillion to 97 trillion won.

Financial Services Commission Chairman Ko Seung-beom emphasized in his New Year's address this year, "We will consistently strengthen the management of household debt, which is identified as the biggest risk factor for our economy," adding, "Based on total volume management, we will normalize the household debt growth rate to 4-5% by enhancing system management."

Meanwhile, from this month, the Debt Service Ratio (DSR) regulation per borrower (individual) has been tightened. If an individual's loan amount exceeds 200 million won, the annual principal and interest payments cannot exceed 40% of their annual income (50% in non-bank sectors). From July, the regulation will expand to those with total loans exceeding 100 million won.

Jeonse deposit loans are not included in the borrower's DSR calculation, and with jeonse prices having risen significantly over the past year, these loans may continue to increase.

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