October Bank Household Loans Increase by 6.8 Trillion Won... Mortgage Loans Down, Other Loans Up

Last month, bank household loans increased by 6.8 trillion won, showing a larger increase compared to the previous month. While the growth in mortgage loans slightly decreased, other loans saw a significant rise.

Despite growing concerns surrounding household loans, the Bank of Korea expects household debt to decrease in the future as government loan regulations take effect.

According to the 'October Financial Market Trends' released by the Bank of Korea on the 8th, bank household loans (including policy mortgage loans) increased by 6.8 trillion won last month, up from 4.8 trillion won in the previous month.

Mortgage loans continued to grow mainly for home purchase funds, but the increase slowed from 6.1 trillion won to 5.8 trillion won. Jeonse deposit loans also turned to a decrease of 100 billion won last month.

Yoon Ok-ja, Deputy Head of the Market General Team at the Bank of Korea’s Financial Market Department, explained the decrease in mortgage loans by saying, "There is a trend of housing transactions slowing down compared to before," and added, "Also, government measures such as discontinuing the special Bo-gumjari loan general type seem to have contributed to slowing mortgage loans."

On the other hand, other loans turned from a 1.3 trillion won decrease in the previous month to a 1 trillion won increase last month, as credit loans rose due to consumer spending during the early month holidays and funds related to public offering subscriptions.

The Bank of Korea responded to concerns that the government’s loan regulations might have caused a 'balloon effect,' shifting mortgage loans to other loans such as credit loans, by saying, "That is not the case."

Deputy Head Yoon stated, "Although other loans appear slightly higher this October compared to October 2021 and 2022, they are not significantly high compared to earlier Octobers. Due to the Debt Service Ratio (DSR) regulations, credit loans are not more advantageous than mortgage loans, so strengthening mortgage loan regulations does not seem to cause a balloon effect toward credit loans."

Last month, bank corporate loans increased by 8.1 trillion won, a smaller increase compared to 11.3 trillion won in the previous month.

Loans to small and medium-sized enterprises continued to grow due to corporate value-added tax payment demands, but the increase sharply declined from 6.4 trillion won to 3.8 trillion won due to loan repayments deferred at the end of the previous month.

However, loans to large corporations increased by 4.3 trillion won, showing a large increase following 4.9 trillion won in the previous month, driven by the use of loans by companies that previously raised funds through direct financing such as corporate bonds and demand for working capital.

In October, bank loans to large corporations recorded the second-largest increase for any October since the statistical bulletin began in June 2009. The record high was 9.3 trillion won in October last year.

The Bank of Korea expects household debt, which has recently raised concerns, to show a decreasing trend.

Deputy Head Yoon said, "Since loans applied for before the government strengthened regulations are still being executed, the effects are not yet visibly prominent, but we expect the government policy effects to impact household loans with a lag of about 2 to 3 months," adding, "The government and the Bank of Korea share the recognition that the household debt-to-GDP ratio should be gradually stabilized downward, so the measures will be effective."

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