Tightening Bank Loans Leads to Clear 'Balloon Effect' in Secondary Financial Sector... 3x Increase Compared to Previous Month

Financial Services Commission to Announce Household Loan Trends in November

[Image source=Yonhap News]

[Asia Economy Reporter Kim Jin-ho] Due to the 'balloon effect' caused by the government's excessive total household debt regulation, the increase in household loans from the secondary financial sector surged threefold in just one month. This is analyzed to be the result of borrowers who could not pass the bank threshold concentrating intensively on mutual finance institutions such as Saemaeul Geumgo and ShinHyup.

According to the 'Household Loan Trends in November' announced by the Financial Services Commission on the 8th, household loans from the secondary financial sector increased by 2.9 trillion won last month. This is a scale three times the increase in October (1 trillion won).

The cause of the sharp increase in household loans from the secondary financial sector lies in mutual finance. The increase in October was only 400 billion won, but last month alone it rose by a whopping 2.1 trillion won. Saemaeul Geumgo led the balloon effect with 1.46 trillion won, and ShinHyup with 850 billion won.

Saemaeul Geumgo and ShinHyup have completely stopped or drastically reduced handling household loans such as mortgage loans since the end of last month. Although the financial authorities continuously requested portfolio changes such as reducing the proportion of secured loans and weekly reporting of household loan increase amounts to prevent the balloon effect in the secondary financial sector, the effect was minimal.

Unlike the secondary financial sector, the increase in household loans in the banking sector has decreased. Last month, household loans in the banking sector increased by 2.9 trillion won, which is 2.2 trillion won less than the increase in October (5.1 trillion won). This is analyzed to be due to a significant reduction in mortgage loan increases compared to the previous month, caused by a decrease in housing sales transactions. Credit loans recorded a level similar to the previous month.

Last month, household loans across all financial sectors increased by 5.9 trillion won. Although the increase was slightly reduced compared to the previous month (6.1 trillion won), the balloon effect in the secondary financial sector was significant, indicating that the quality of household debt has worsened.

A financial authority official explained, "We will continue to promote the smooth landing of household loans by ensuring the flawless implementation of strengthened household debt management measures."