From Credit Loans to Jeonse Loans... Household Loan Decline Continues

Credit Loans Decrease by 2 Trillion Won for Two Consecutive Months
Jeonse Loans Also Decline Continuously
Corporate Loans Increase, but Bank Loan Growth 'Stalls' Amid Normalization Next Year

[Image source=Yonhap News]

[Asia Economy Reporter Minwoo Lee] As the era of high interest rates continues, household loans, from credit loans to jeonse deposit loans, have been declining day by day. Companies, whose financing channels have narrowed, are borrowing from banks, but given the special circumstances, bank loan growth is expected to slow down starting next year.

According to the financial sector on the 4th, the outstanding household loans of the five major commercial banks?KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup?stood at 693.0346 trillion KRW last month, down by 612.9 billion KRW compared to the previous month. This marks a monthly decline without exception since the beginning of this year.

In particular, credit loans are sharply decreasing. As of last month, the outstanding household credit loans amounted to 121.5888 trillion KRW, down by 2.041 trillion KRW from the previous month. This is a decrease of about 2 trillion KRW for two consecutive months. Since the beginning of this year alone, it has decreased by 17.9684 trillion KRW.

Jeonse deposit loans also showed sluggish performance, decreasing by 997.8 billion KRW compared to the previous month. Jeonse loans, which have driven bank loan growth in the past, have declined for two consecutive months. Although jeonse loans have increased by a total of 3.3678 trillion KRW this year, this is a modest figure compared to the more than 17.7 trillion KRW increase during the same period last year. This is interpreted as an effect of falling jeonse prices due to rising interest rates and increased demand for monthly rent conversions.

Byunggeon Lee, a researcher at DB Financial Investment, predicted, "Housing mortgage loans, including jeonse loans, increased due to growth in group loans, but with the rise in jeonse loan interest rates, the attractiveness of monthly rent compared to jeonse is relatively higher, so the decline in jeonse loans is expected to continue for the time being."

On the other hand, corporate loans are steadily increasing. Only loans to large corporations increased by 4.1802 trillion KRW compared to the previous month. Even considering that about 1.5 trillion KRW of loans to Korea Electric Power Corporation (KEPCO) are included, this is regarded as a sharp increase. Given that an additional loan of more than 500 billion KRW to KEPCO is expected within the year, the increase in corporate loans is expected to continue until the end of the year.

Bank loan growth rates next year are expected to remain in the 3% range. Household loans across the banking sector are still maintaining their level due to the increase in household loans by internet-only banks. However, since credit loans have been decreasing by about 2 trillion KRW each month in the second half of this year and jeonse loans have also entered a declining trend, the downward trend in household loans is considered inevitable.

Researcher Lee explained, "Since 2017, when jeonse loans became widespread, months with a decrease in jeonse loan balances have been rare, but the recent two consecutive months of decline have seen the magnitude increase. Although corporate loans have sharply increased this year, if the base interest rate hike stops next year and the funding market normalizes, the growth rate of corporate loans will decrease, causing bank loan growth to fall to around 3%."

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