Household Loans Decrease by 1.5 Trillion Won in Q1... First Decline Since Statistics Began

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[Asia Economy Reporter Seo So-jeong] Household loans decreased for the first time since the statistics compilation in the fourth quarter of 2002 due to a slowdown in housing sales transactions and strengthened household loan management.

According to the 'Household Credit (Provisional) for the First Quarter of 2022' statistics released by the Bank of Korea on the 24th, as of the end of March, the outstanding household credit balance was 1859.4 trillion KRW, down 600 billion KRW from the previous quarter. This marks the first decline since the first quarter of 2013.

Household credit is the total amount of loans households have received from banks, insurance companies, lending institutions, public financial institutions, etc., plus prepayment card usage amounts (sales credit) before settlement. Household credit generally increases with the expansion of the economy but surged sharply after the spread of COVID-19 before turning to a decline again.

Excluding sales credit such as card payments from household credit, the outstanding household loan balance stood at 1752.7 trillion KRW at the end of the first quarter, down 1.5 trillion KRW from the previous quarter. This is the first decrease in household loans since the statistics compilation in the fourth quarter of 2002. It is interpreted as due to a slowdown in housing sales transactions, strengthened household loan management, and rising loan interest rates.

Among household loans, the outstanding balance of mortgage loans was 989.8 trillion KRW, an increase of 8.1 trillion KRW compared to the previous quarter. However, the increase narrowed compared to the previous quarter due to the slowdown in housing sales transactions.

Other loans, including unsecured loans, amounted to 762.9 trillion KRW, down 9.6 trillion KRW from the previous quarter. The decrease significantly expanded due to government and financial institutions' household loan management and rising loan interest rates.

Song Jae-chang, head of the Financial Statistics Team at the Bank of Korea, explained, "The increase in mortgage loans narrowed compared to the fourth quarter of last year due to the slowdown in housing transactions," and "Other loans, including unsecured loans, saw a larger decrease due to rising loan interest rates and strengthened management by the government and financial institutions." He added, "Household loans at deposit banks slightly increased again in April due to efforts to ease loan regulations by financial institutions, but since loan interest rates continue to rise and housing sales transactions are expected to remain sluggish, the trend needs to be monitored further."

By institution, the increase in household loans turned negative for deposit banks (-4.5 trillion KRW) and non-bank deposit-taking institutions such as mutual savings banks and credit cooperatives (-2.5 trillion KRW) compared to the previous quarter, while other financial institutions (5.5 trillion KRW), centered on other financial intermediaries, turned positive.

As of the end of the first quarter, the outstanding balance of sales credit was 106.7 trillion KRW. It increased by 800 billion KRW compared to the previous quarter, mainly in credit specialized companies, due to the easing of social distancing measures.

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