Unyielding Household Loans, Increase of 6.5 Trillion in March... Balance at 1009.5 Trillion

Bank of Korea Announces 'Financial Market Trends'

On the 9th, the loan counter at Hana Bank in Euljiro, Seoul. / Photo by Mun Ho-nam munonam@

[Asia Economy Reporter Kim Eunbyeol] Last month, household loans in the banking sector increased by 6.5 trillion KRW, mainly driven by mortgage loans. Although the rapid rise in unsecured loans has stopped, the pace of household loan growth remains steady.

According to the "Financial Market Trends" report released by the Bank of Korea on the 14th, as of the end of March, the outstanding household loans at banks amounted to 1,009.5 trillion KRW, an increase of about 6.5 trillion KRW compared to the end of February. This March increase is the second highest on record, following March last year (9.6 trillion KRW).

Among household loans, mortgage loans including Jeonse deposit loans (outstanding balance of 739 trillion KRW) grew by 5.7 trillion KRW in one month. Although the increase was smaller than in February (6.5 trillion KRW), it was still the second largest for March, following last year (6.3 trillion KRW).

The increase in Jeonse deposit loans slowed from 3.4 trillion KRW to 2.8 trillion KRW in one month.

Other loans, mostly consisting of unsecured loans (outstanding balance of 269.6 trillion KRW), increased by 80 billion KRW compared to the end of February. Although this increase was larger than the previous month (30 billion KRW), the growth rate has slowed compared to the 2 to 3 trillion KRW monthly increases seen until January this year and last year.

Park Sungjin, Deputy Head of the Market General Team at the Bank of Korea’s Financial Market Department, explained the background of the mortgage loan increase, stating, "The rise in housing sales and Jeonse transactions in the fourth quarter of last year is estimated to have affected mortgage loans in March with a lag of about three months." Regarding unsecured loans, he added, "Other loans including unsecured loans decreased in March following February, which seems to be due to household loan regulations and banks’ own risk management."

At the end of last month, the outstanding corporate loans at banks reached 1,000 trillion KRW, an increase of 4.6 trillion KRW compared to the previous month. Among these, loans to large corporations stood at 173.1 trillion KRW, down by 2.7 trillion KRW from the previous month, while loans to small and medium-sized enterprises increased by 7.3 trillion KRW to 826.9 trillion KRW.

Meanwhile, on the same day, the Financial Services Commission announced household loans across the entire financial sector, including banks and secondary financial institutions. Household loans across the entire financial sector increased by 9.1 trillion KRW last month compared to the previous month, a smaller increase than the 9.7 trillion KRW rise in the previous month. However, compared to a year ago, the scale of household loans grew by 8.4%. By loan type, mortgage loans across the entire financial sector increased by 6.5 trillion KRW compared to the previous month, a decrease of 1.3 trillion KRW from the previous month’s 7.8 trillion KRW increase.