Household Loans Down 1.8 Trillion Won in February... First Decline in 11 Months

Mortgage Loans Increase by 3.7 Trillion
Seasonal Factors Such as Lunar New Year Bonuses Influence Growth

Household loans recorded their first balance decrease in 11 months last month.

The Financial Services Commission announced on the 13th that household loans across all financial sectors decreased by 1.8 trillion KRW in February compared to the previous month. This is the first time the household loan balance has decreased since March last year (a decrease of 6.5 trillion KRW), marking an 11-month interval.

By loan type, the decrease in household loans was largely influenced by a significant reduction in other loans (excluding mortgage loans). Other loans decreased by 5.5 trillion KRW in February, a larger drop compared to the previous month (3.2 trillion KRW decrease). Other loans in the banking sector and the secondary financial sector each decreased by 2.7 trillion KRW. Both showed an expanded decrease compared to the previous month (1.5 trillion KRW and 1.7 trillion KRW decrease, respectively). Authorities explained this was due to the inflow of bonuses during the Lunar New Year holiday.

[Image source=Yonhap News]

Mortgage loans increased by 3.7 trillion KRW, maintaining an upward trend, but the increase was slightly smaller than the previous month (4.1 trillion KRW). Mortgage loans in the banking sector increased by 4.7 trillion KRW, slightly less than the previous month (4.9 trillion KRW), while the secondary financial sector saw a 1 trillion KRW decrease, widening the decline.

By financial sector, household loans in the banking sector increased by a total of 2 trillion KRW, with the growth rate shrinking. Looking in detail at February’s banking sector mortgage loans, individual mortgage loans increased by 5.2 trillion KRW, expanding the increase compared to the previous month (3.4 trillion KRW). However, group loans turned to a decrease (700 billion KRW decrease), and jeonse loans (1.4 trillion KRW decrease) slightly narrowed their decline, resulting in an overall 200 billion KRW decrease compared to the previous month (4.9 trillion KRW).

The authorities stated, "As in the previous month, bank-originated mortgage loans continued to increase due to refinancing demand, but policy mortgages and group loans sharply decreased. Other loans saw an expanded decrease centered on credit loans due to the inflow of holiday bonuses."

Household loans in the secondary financial sector decreased by a total of 3.8 trillion KRW, significantly expanding the decline compared to the previous month (2.5 trillion KRW). By sector, mutual finance (3 trillion KRW decrease) and insurance (600 billion KRW decrease) continued their downward trend, while savings banks (100 billion KRW decrease) and specialized credit finance companies (100 billion KRW decrease) also turned to a decline.

The financial authorities said, "The reduction in household loans this time is largely due to the seasonal factor of decreased other loans caused by Lunar New Year bonuses. Since the increase in bank-originated mortgage loans continues due to expanded refinancing demand, we plan to closely monitor the housing market, interest rate conditions, and other factors to manage the household loan growth trend stably in the future."