Household loans from the five major banks increased by more than 3.6 trillion won this month. This is analyzed to be due to a surge in demand trying to catch the last train as real estate transactions increased and market interest rates fell, prompting authorities to suddenly postpone the implementation of the second phase of the stress Debt Service Ratio (DSR).
According to the financial sector on the 21st, the outstanding household loans of the five banks?KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup?stood at 712.1841 trillion won as of the 18th of this month, an increase of 3.6118 trillion won compared to the end of last month.
Household loans at these banks surged by 5.3415 trillion won in June alone, marking the largest increase in 2 years and 11 months since July 2021 (6.2 trillion won). The upward trend has continued into July.
Mortgage loans are cited as the main cause. As housing transactions increased mainly in the metropolitan area and real estate prices rose, buying sentiment revived. In fact, mortgage loans alone expanded by 3.7991 trillion won to 555.9517 trillion won.
It is also analyzed that demand to secure loans before limits are reduced ahead of the stress DSR implementation is stimulating household debt. Previously, financial authorities suddenly postponed the implementation of the second phase of the stress DSR, which was scheduled to start this month, to September.
DSR is a regulation that calculates loan limits based on annual income and principal and interest repayment amounts. Stress DSR is a system that reduces loan limits by adding a certain level of additional interest rate.
The overall continued decline in market interest rates is also interpreted as a factor that increased household loans. As of the 19th, the mixed (fixed) interest rates for mortgage loans (based on 5-year bank bonds) at KB Kookmin, Shinhan, Hana, and Woori banks ranged from 2.840% to 5.294% per annum. Compared to about half a month ago on the 5th of this month, the upper limit dropped by 0.076 percentage points (p) and the lower limit by 0.060 p. The interest rates for unsecured loans (grade 1, 1-year maturity) also fell by 0.070 p at both the upper and lower ends, ranging from 3.960% to 5.960%.
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