Household Loans 'Red Light'... August Mortgage Loans Increase by 7 Trillion Won, Largest in 3 Years and 6 Months

Bank of Korea Announces August Financial Market Trends
Household Loans Surge Due to Sharp Increase in Mortgage Loans
Corporate Loans Also Rise by 8.2 Trillion Won

View of Yeouido Hanyang Apartment from the 63 Building Observatory. Photo by Hyunmin Kim kimhyun81@

Last month, household loans in the banking sector increased by 6.9 trillion KRW, marking the largest increase in 2 years and 1 month. This was due to a surge of 7 trillion KRW in mortgage loans within a month, driven by revived housing purchase demand mainly in the metropolitan area.

According to the 'Financial Market Trends in August' released by the Bank of Korea on the 13th, the balance of household loans (including policy mortgage loans) at deposit banks stood at 1,075 trillion KRW as of the end of August, up 6.9 trillion KRW from the previous month.

In terms of balance, this marked another record high following last month.

Household loans in the banking sector have increased for five consecutive months from April (2.3 trillion KRW), May (4.2 trillion KRW), June (5.8 trillion KRW), July (5.9 trillion KRW), to August.

The increase in household loans in August was the largest in 2 years and 1 month since July 2021, when it rose by 9.7 trillion KRW.

Household loans increased significantly, centered on mortgage loans.

According to the Bank of Korea, despite a slowdown in jeonse deposit demand (-100 billion KRW), bank mortgage loans increased by 7 trillion KRW in August, mainly for housing purchase-related funds. This is the largest increase in 3 years and 6 months since February 2020, when it rose by 7.8 trillion KRW.

Yoon Ok-ja, Deputy Head of the Market General Team at the Bank of Korea, said, "As the housing market has shown signs of recovery this year, demand for funds related to housing purchases has increased, which is driving demand for bank mortgage loans. Until the first quarter of this year, there was a clear trend of loan repayments due to high interest rates, but recently this has slowed down."

While the introduction of 50-year mortgage loans seems to have influenced the increase in household loans, the Bank of Korea explained that it is not enough to lead the overall increase.

Deputy Head Yoon stated, "It is understood that a significant portion of the increased mortgage loans were handled in the form of 50-year maturities," but added, "the fundamental reason for the increase in household loans is the demand for funds related to housing transactions, and it is hard to say that 50-year mortgage loans are leading the household loan trend."

She added, "The government is strengthening the management of 50-year mortgage loans, and with the recent increase in the special Bogeumjari loan interest rates, it is expected to slow down the increase in household loans to some extent. However, the extent of this effect needs to be observed further."

Corporate loans at banks also surged by 8.2 trillion KRW in August. This is the second-largest increase on record for August since the preliminary statistics began in June 2009.

Loans to large corporations increased by 2.9 trillion KRW due to continued demand for working capital and facility funds from high-quality companies, while loans to small and medium-sized enterprises (SMEs) rose by 5.2 trillion KRW, driven by banks' efforts to expand corporate financing and demand for facility funds from corporations.

Deputy Head Yoon explained, "Recently, companies tend to raise funds through bank loans rather than corporate bonds, which seems to be why loans to large corporations are steadily increasing," adding, "overall corporate funding has slowed compared to last year."

Bank deposits shifted from a decrease of 23.1 trillion KRW in July to a significant increase of 27.9 trillion KRW last month.

Demand deposits increased by 1.1 trillion KRW as the seasonal decrease factor from the previous month disappeared, and time deposits grew by 14 trillion KRW due to continued inflows of funds from local governments and households, along with some banks' efforts to raise corporate funds.

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