Reversal of Loan Supply Willingness and Borrower Demand After 3 Years

[Asia Economy Reporter Song Hwajeong] Due to rising interest rates and fluctuations in the stock and real estate markets, borrower demand has weakened more than lenders' willingness to supply loans for the first time in two years. It is expected that the decline in household loans will continue until the new government's loan easing and real estate policies are concretized.

According to Hanwha Investment & Securities on the 22nd, in the first quarter of this year, household loan demand weakened more than lenders' willingness to supply loans for the first time in three years. While household loans are decreasing and banks are lowering loan thresholds, borrower demand is shrinking due to rising interest rates and asset price fluctuations.

According to the Bank of Korea, the loan balance of deposit banks in March recorded 215.3 trillion won, a 7% increase compared to the same period last year, but household loans decreased by 1 trillion won compared to the previous month, marking the first time since 2000 that they have declined for four consecutive months as confirmed by statistics. General loans including credit in household loans decreased by 3.1 trillion won in March, causing the year-on-year growth rate to fall to 1%, and it is expected to turn into a decline in April. Housing loans increased by only 2.1 trillion won, with the year-on-year growth rate declining for nine consecutive months.

The rise in interest rates has acted as a burden on borrowers, leading to weakened demand. The newly announced COFIX for March on the 15th rose by 0.02 percentage points from 1.70% to 1.72% in one month.

An official from a commercial bank said, "In a situation where interest rates are rising, speculative demand to take out loans in advance has disappeared," adding, "Even if banks lower interest rates by adjusting preferential or additional rates, COFIX and bond yields continue to rise, maintaining an overall upward trend in interest rates."

The sluggish stock market and high-level real estate prices also affected the weakening of borrowers' loan demand. Until last year, the stock market was strong and real estate prices continued to rise, leading to a significant increase in 'Yeongkkeul (borrowing to the limit)' and 'Bittu (investing with debt),' but this demand disappeared as the stock market has been sluggish and real estate transactions have decreased this year.

Loan demand is expected to remain weak for the time being. It is anticipated that a wait-and-see stance will continue until the new government's real estate and loan-related policies are concretized. Kim Doha, a researcher at Hanwha Investment & Securities, analyzed, "The weakened demand will continue for the time being," and added, "The recovery of transaction volume in the real estate market will be the key to the recovery of household loans."

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