Credit Loans from 5 Major Banks Increased by 4.07 Trillion Won Compared to July
Mortgage Loans Also Rose by 4.16 Trillion Won... Third Largest Increase This Year
[Asia Economy Reporters Hyojin Kim, Minyoung Kim] Last month, personal credit loans at major commercial banks surged by more than 4 trillion KRW, marking an all-time high. During the same period, mortgage loans also increased by a similar scale, indicating a rapid rise in household debt. This trend is interpreted as being influenced by various factors, including 'debt investment' (bit-tu), where people borrow money under ultra-low interest rates to invest in stocks, and the 'young-kkeul' movement among people in their 30s and 40s, who gather all available loans and assets to buy their own homes.
According to the banking sector on the 2nd, the total personal credit loan balance at the five major commercial banks?KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup?stood at 124.2747 trillion KRW at the end of last month, an increase of 4.0705 trillion KRW (3.38%) compared to the end of the previous month. The growth rate increased by more than 1 percentage point compared to the previous month (2.28%). This is the largest monthly increase on record. The increase in personal credit loans at the five major banks dropped from the 2 trillion KRW range in March to about 500 billion KRW in April but has since shown a steep upward trend again.
The increase in mortgage loans is also notable. The mortgage loan balance at these banks reached 456.9836 trillion KRW at the end of last month, a sharp rise of 4.1606 trillion KRW (0.91%) compared to the previous month. This marks the third-largest increase this year following March and April. The growth rate is more than three times that of the previous month (0.30%). Although the increase slowed to about 840 billion KRW in June, it has been rising rapidly again since July.
A representative from a commercial bank explained, "There appears to be a clear movement of 'young-kkeul panic buying,' where young people take out the maximum available mortgage loans and cover the shortfall with personal credit loans to buy homes." K Bank reported that about 26,400 people applied for apartment mortgage pre-loans between the 20th and 26th of last month, with 55% of applicants being in their late 30s to early 40s.
Complex Effects of Low Interest Rates, Liquidity, and COVID-19
Concerns Rise Over Defaults Due to Increased Delinquencies Among 20s and 30s
The trend of 'debt investment' (bit-tu), where people borrow to jump into the rising stock market fueled by liquidity expansion, is also prominent. A banking official said, "It seems likely that a significant portion of the tens of trillions of won poured into SK Biopharm and Kakao Games subscriptions recently came from personal credit loans." This analysis is supported by the fact that personal credit loans at the five major banks increased by 1.2 trillion KRW from the 1st to the 13th of last month and then surged by 2.8 trillion KRW in less than three weeks from the 14th to the 31st.
Interest rates remaining in the high 2% range, speculation that financial authorities and the banking sector may tighten regulations on personal credit loans following mortgage loans to manage soundness, and concerns over funding difficulties due to the spread of COVID-19 have also fueled the recent increase in loans. Bank officials unanimously agree that the prevailing attitude is very much "let's just borrow first and see."
As loans rapidly increase, concerns about potential defaults, especially among younger generations, are also rising. An analysis by the National Fiscal Research Institute of Korea Credit Bureau (KBC) data as of the end of July shows that both loan amounts and delinquencies have significantly increased among people in their 20s and 30s. The average loan amount per person in their 30s was 37.77 million KRW, up 1.97% from the previous month, while the average delinquency amount per person rose 3.92% to 562,000 KRW.
For those in their 20s, the average loan amount per person increased 4.08% to 6.98 million KRW, and the delinquency amount rose 3.5% to 108,000 KRW compared to the previous month.
In contrast, the total loan amount for people in their 40s increased by only 0.51%, while loan amounts for those in their 50s and 60s decreased by 0.23% and 1.04%, respectively. The average delinquency amount per person increased by 1.23% for those in their 40s, 0.55% for those in their 50s, and 0.54% for those in their 60s.
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