Despite 'Daechul Okjoegi', Household Loans Increased by 6.3 Trillion Won in October... Highest in Over 2 Years

Financial Services Commission 'Household Loan Trends in October 2023'

Despite the financial authorities' 'tightening of loans,' household loans in the financial sector in October increased to the highest level in 25 months, as well as the highest this year.

According to the 'Household Loan Trends in October 2023' announced by the Financial Services Commission on the 8th, household loans across all financial sectors increased by 6.3 trillion KRW last month. This not only surpassed the largest increase this year in August (6.1 trillion KRW) but also marked the highest level since September 2021 (7.8 trillion KRW), when real estate prices were soaring.

Jamsil Jugong Apartment Complex 5. Photo by Heo Younghan younghan@

The increase in household loans in the financial sector has been gradually rising every month since April this year (100 billion KRW), reaching 6.1 trillion KRW in August. It then slowed to an increase of 2.4 trillion KRW in September before rising again to the year's highest level of 6.3 trillion KRW in October.

By loan category, mortgage loans increased by 5.2 trillion KRW, a 500 billion KRW decrease compared to the previous month (5.7 trillion KRW), but other loans turned from a decrease of 3.3 trillion KRW in the previous month to an increase of 1.1 trillion KRW, driving the overall household loan growth.

For mortgage loans, banks saw an increase of 5.8 trillion KRW, slightly slowing from 6.1 trillion KRW in the previous month, while the secondary financial sector decreased by 600 billion KRW, widening the decline compared to the previous month.

Regarding other loans, the increase expanded last month due to one-off factors and base effects. The Financial Services Commission explained, "In the previous month, other loans decreased by 3.3 trillion KRW due to a temporary effect of Chuseok holiday bonuses inflow, so the increase this month is largely influenced by this base effect."

By sector, household loans in the banking sector increased by 6.8 trillion KRW, up 2 trillion KRW from 4.8 trillion KRW in the previous month. Mortgage loans in the banking sector increased by 5.8 trillion KRW, mainly policy loans, showing a slight slowdown in growth due to improvements in the Debt Service Ratio (DSR) calculation maturity and adjustments in the speed of policy mortgage loans.

Specifically, individual mortgage loan increases rose by 500 billion KRW from the previous month to 4.1 trillion KRW, but excluding the bank-funded Didimdol loans, the level remained the same as the previous month at 2.3 trillion KRW. The increase in policy mortgage loans also decreased by 700 billion KRW from the previous month to 1.4 trillion KRW, showing a declining trend. Other group loans increased by 300 billion KRW as in the previous month, and jeonse loans turned to an increase of 100 billion KRW.

Other loans in the banking sector increased by 1 trillion KRW, leading the upward trend. The authorities explained this was due to a base effect from the previous month's decrease, moving costs during the moving season, and temporary funding demands such as Initial Public Offerings (IPO), resulting in a 1.2 trillion KRW increase in unsecured loans, reversing the previous month's decrease of 1.3 trillion KRW.

Meanwhile, household loans in the secondary financial sector decreased by a total of 500 billion KRW, narrowing the decline compared to 2.5 trillion KRW in the previous month. Specialized credit finance companies (700 billion KRW), insurance companies (400 billion KRW), and savings banks (100 billion KRW) increased due to a base effect from write-offs at the end of the previous quarter, but mutual finance cooperatives continued to decline by 1.7 trillion KRW.

An official from the financial authorities stated, "The expansion of household loan increases in October was mainly due to the base effect from the previous month’s increase in other loans such as unsecured loans, but it is necessary to manage them at an appropriate level with vigilance going forward." They added, "We plan to strengthen loan screening, including the announcement of variable interest rate stress DSR within the year, to prevent excessive loans beyond borrowers' repayment capacity."

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