Last month, household loans at banks significantly expanded, mainly driven by mortgage loans.
According to the financial market trends for May released by the Bank of Korea on the 9th, the increase in household loans at banks last month was 4.2 trillion won, a substantial rise compared to 2.3 trillion won in April.
This is the largest monthly increase since October 2021, when loans rose by 5.2 trillion won.
The expansion in household loans was influenced by the increase in mortgage loans, which rose from 2.8 trillion won to 4.3 trillion won due to continued demand for home purchase funds and a weakening slowdown in jeonse (key money deposit) loan demand.
Yoon Ok-ja, Deputy Head of the Market General Team at the Bank of Korea’s Financial Market Department, explained, "There is usually a 2 to 3-month lag between signing a housing sales contract and the execution of mortgage loans. The increase in apartment sales transactions in February and March this year appears to have led to the demand for mortgage loans in May."
She added, "The decline in jeonse loan demand also slowed down from -2.3 trillion won in March to -1.7 trillion won in April and -600 billion won in May. This also contributed to the expansion of mortgage loan growth."
The 4.3 trillion won increase in mortgage loans is also the largest since October 2021 (4.7 trillion won).
Bank corporate loans continued their strong growth. Corporate loans expanded further from 7.5 trillion won in April to 7.8 trillion won in May.
Loans to large corporations increased significantly from 3.1 trillion won to 3.4 trillion won, driven by demand for working capital and funds to repay corporate bonds. Loans to small and medium-sized enterprises (4.4 trillion won) have been steadily increasing due to banks’ accommodative lending attitudes.
The Bank of Korea explained, "The increase in bank corporate loans in May is the third largest for any May since the preliminary statistics began in June 2009."
Bank deposits rose from a decrease of 13.4 trillion won in April to an increase of 8.2 trillion won last month.
Demand deposits decreased for the second consecutive month as household and corporate funds outflowed despite inflows from local governments.
On the other hand, time deposits sharply increased by 10.5 trillion won, supported by inflows from households and local governments, along with efforts by some banks to attract corporate funds.
Deputy Head Yoon said, "Although bank time deposit interest rates have risen slightly recently, they are still not at the high levels seen at the end of last year. Whether time deposits will continue to increase as a trend or if this is a temporary inflow of funds needs to be observed for another month or two."
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