[Monetary and Credit Policy Report] "Jeonse Loan Increase Expected... Need to Monitor Household Loan Trends Next Year"

Bank of Korea Publishes Monetary and Credit Policy Report
Increase Expected in 'Jeonse Loans and Group Loans' Avoiding Regulations

[Asia Economy Reporter Jang Sehee] The Bank of Korea has expressed the opinion that it is necessary to observe further whether the trend of slowing household loans will continue beyond next year. Additionally, it analyzed that loans with relatively low regulatory impact, such as jeonse deposit loans and group loans, will continue to increase.

On the 9th, the Bank of Korea announced this in the Monetary and Credit Policy Report (December 2021), which was approved at the Monetary Policy Committee meeting, regarding the outlook for household loans.

The Bank of Korea stated, "Household loans are expected to maintain the current slowing trend for the time being due to factors such as the financial sector's strong management of rapid growth and seasonal off-peak periods," but also added, "It is necessary to observe further whether the slowing trend of household loans will continue beyond next year."

It forecasted that regulations such as the Debt Service Ratio (DSR), which will be implemented from next year, will act as a factor to curb the increase in household loans. However, it analyzed that loans with relatively low regulatory impact, such as jeonse deposit loans and group loans, will continue to increase.

The Bank of Korea noted that the high rise in housing prices is continuing and household loan demand remains strong.

Currently, housing sale prices in both the metropolitan area and provinces are maintaining a high level, with the rate of increase still significantly exceeding the long-term average. In particular, jeonse prices are continuing a strong upward trend due to factors such as the implementation of the monthly rent reporting system, shortage of listings caused by holding tax burdens, and increased demand from reconstruction relocations and subscription waiting.

Meanwhile, the Bank of Korea stated, "The recent rise in household debt growth rate and housing prices has somewhat eased," but added, "Since there is high uncertainty regarding the persistence and strength of this trend, it is necessary to remain cautious about the risk of accumulating financial imbalances."