Household Debt at Banks Increased by 3.3 Trillion KRW in February "Monitoring Whether Housing Transactions Expand Following the Lifting of the Loan-to-Value Ratio Cap"

Bank Household Loans Turn Upward in February After Three Months
Loan Handling Resumed by Banks and Moving Season Demand Drive Mortgage Growth
"Increase in Housing Transactions After Lifting of Land Transaction Permit Zones, Monitoring Spread of Trend"

Last month, bank household loans turned to an increase for the first time in three months. This was influenced by the resumption of loan handling by banks and increased demand during the moving season, which expanded the growth of mortgage loans (jumdae). The recent rise in housing transaction volume is expected to lead to an increase in household loans after 2 to 3 months, warranting close monitoring.

A loan information board is posted at a branch of a major commercial bank in Jung-gu, Seoul.

According to the 'Financial Market Trends in February 2025' released by the Bank of Korea on the 12th, the outstanding balance of bank household loans as of the end of last month was 1,143.7 trillion won, an increase of 3.3 trillion won compared to the end of the previous month. This marks the first increase in three months since November last year (an increase of 1.9 trillion won).

Among bank household loans, mortgage loans increased by 3.5 trillion won to 907.7 trillion won. The resumption of loan handling by banks and demand for funds during the moving season contributed to the growth in mortgage loan size. Nationwide apartment sales volume was 22,000 units in January, showing a decline for three consecutive months; however, apartment sales in Seoul in January were 3,200 units, slightly up from 3,000 units in December last year. Jeonse deposit loans, which are included in mortgage loans, increased by 1.2 trillion won compared to the previous month, marking the largest increase since February 2022.

Other loans decreased by 200 billion won, reducing the decline compared to the previous month (a decrease of 2.1 trillion won). This was due to the disappearance of seasonal factors such as bonus payments in January. Other loans include general credit loans, credit limit loans (overdraft loans), commercial real estate secured loans, deposit-secured loans, and stock-secured loans.

Last month, total household loans including non-bank loans increased by around 4 trillion won compared to the previous month. Park Min-cheol, Deputy Head of the Market General Team at the Bank of Korea's Financial Market Department, said, "The increase in household loans last month was mainly due to seasonal factors. Mortgage loans expanded due to increased demand for funds during the moving season, and the decline in other loans narrowed as the effect of bonus inflows in January disappeared."

The fact that loans from the long Lunar New Year holiday at the end of January were recorded all at once in early February also contributed to the increase in household loans in February. Deputy Head Park said, "The average increase in bank and non-bank household loans in January and February is about 1.7 trillion won. We still assess that the slowdown trend in household loans since the second half of last year is continuing."

However, after the lifting of land transaction permission zones last month, housing prices in the three Gangnam districts (Gangnam, Seocho, and Songpa) and Ma-Yong-Seong (Mapo, Yongsan, and Seongdong districts) rose and housing transactions expanded. It is necessary to carefully observe whether this movement will continue as a trend. The long-term average for Seoul housing transactions since 2010 is around 5,600 units. In July last year, when the housing market was overheated, it reached about 8,500 units. Since then, it has dropped to around 3,000 units by the end of last year and has continued at that level through January. The transaction volume for last month, to be released at the end of this month, is expected to increase from this level. Deputy Head Park said, "The most important factor determining the increase in household loans is housing transaction volume, which can exert pressure on household loan growth with a lag of 2 to 3 months."

In particular, attention should be paid to the duration of the increase in transaction volume and the spread to other areas. He explained, "It is still uncertain whether the increase in housing transactions will absorb pent-up demand and pause, or spread to all areas of Seoul such as No-Do-Gang (Nowon, Dobong, and Gangbuk districts). However, this will be a key factor in determining household loan trends from April to June. We are closely monitoring household debt risk factors together with the government."

Meanwhile, the outstanding balance of bank corporate loans at the end of last month was 1,326.4 trillion won, an increase of 3.5 trillion won compared to the previous month. This significantly reduced the increase compared to the previous month's 7.8 trillion won. The expansion of policy loans by some banks led to a 3.1 trillion won increase in small and medium-sized enterprise loans, mainly to small and medium-sized corporations, which boosted the increase. However, large corporate loans increased by only 400 billion won, greatly reducing the increase compared to the previous month's 6.1 trillion won. The repayment of temporarily borrowed working capital in the previous month also significantly reduced the increase. Deputy Head Park said, "Corporate loans have been slowing since the second half of last year due to global economic uncertainties. After seasonal factors in January, the increase narrowed again in February, and even considering the average of January and February, corporate funding demand has not significantly recovered."

Regarding fund raising through direct finance, net issuance of corporate bonds expanded from 1.8 trillion won in January to 3.6 trillion won last month. This was influenced by good institutional investment demand at the beginning of the year, early refinancing, and some companies' overseas investment demand. Commercial paper (CP) and short-term bonds shifted to net repayment of 1.6 trillion won, as working capital temporarily raised in the previous month was repaid.

Bank deposits in February sharply reversed from -33.3 trillion won in January to an increase of 24.8 trillion won last month. Demand deposit accounts increased from -32.3 trillion won to 10 trillion won due to inflows of corporate settlement funds and local government fiscal execution standby funds. Time deposits increased by 16 trillion won due to deposit attraction for regulatory ratio management by some banks and temporary operational funds inflow from local governments. Asset management company deposits also increased significantly by 39.3 trillion won, following 38.1 trillion won in the previous month, mainly in money market funds (MMFs) and bond funds. MMFs attracted 21.7 trillion won, mainly corporate funds, due to the yield advantage from short-term interest rate declines.

Bond funds and other funds saw inflows of 9.2 trillion won and 6.6 trillion won respectively, expanding fund inflows. Equity funds' inflow decreased from 5.4 trillion won to 1.8 trillion won.

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