Did Low Interest Rates Work?... Inbaeng's Household Loans Increase by 5 Trillion Won This Year Despite Decline

[Asia Economy Reporter Buaeri] Loans from internet-only banks have increased by more than 5 trillion won since the beginning of this year. This contrasts with the household loans of major commercial banks, which have decreased for 11 consecutive months, reducing by more than 16 trillion won. The competitive interest rates offered by internet-only banks, which provide relatively lower mortgage loan rates than commercial banks, also played a role. Additionally, while high-interest rates have reduced loan demand from high-credit borrowers, loans for living expenses among middle- and low-credit borrowers have remained steady.

According to KakaoBank and K Bank on the 2nd, the loan balance of the two banks at the end of November recorded 38.4133 trillion won. This increased by 569.1 billion won compared to the previous month and rose by 5.4619 trillion won compared to the end of 2021. Looking at each bank, KakaoBank's loan balance at the end of November was 27.8633 trillion won, and K Bank's was about 10.55 trillion won. These amounts increased by 149.1 billion won and 420 billion won respectively compared to the previous month.

In the case of Toss Bank, the household loan balance at the end of November was not disclosed, but the loan balance as of the end of the third quarter was 7.1292 trillion won, an increase of 2.8352 trillion won compared to the end of the second quarter (4.294 trillion won).

This contrasts with the household loans of the five major commercial banks, which have decreased for 11 consecutive months. The household loan balance of KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup banks as of the end of November was 693.0346 trillion won. This decreased by 612.9 billion won compared to the previous month. The household loan balance of the five major banks has continued to decline for 11 consecutive months, decreasing by 16.0183 trillion won compared to the end of 2021.

The increase in loans from internet-only banks is interpreted as a result of offering relatively lower interest rates than commercial banks. Internet-only bank officials explained that the proportion of customers refinancing loans has also noticeably increased recently. The variable mortgage loan interest rates of KakaoBank and K Bank range from 4.3% to 6.096% (based on new COFIX), which is nearly 1 percentage point lower than commercial banks, where the upper limit of interest rates is in the high 7% range. An internet-only bank official said, "By conducting everything from loan consultation to execution non-face-to-face, we have reduced costs, making it possible to offer customers lower interest rates during high-interest periods."

There has also been an expansion of loans targeting middle- and low-credit borrowers. Loans for middle- and low-credit borrowers are steadily in demand as they are used for living expenses and other purposes. In fact, the proportion of credit loans to middle- and low-credit borrowers at internet-only banks rose across the board in the third quarter, bringing year-end targets within reach. As of the third quarter, KakaoBank was at 23.2%, K Bank at 24.7%, and Toss Bank at 39%. Compared to the end of last year, KakaoBank increased by 6.2 percentage points, K Bank by 8.1 percentage points, and Toss Bank by 15.1 percentage points.