August Growth Rate at Half Level
Household loans in the financial sector increased by 5.2 trillion KRW in September compared to the previous month. According to the "Household Loan Trends for September 2024 (Provisional)" report released on the 11th by the Financial Services Commission and the Financial Supervisory Service, this figure is nearly half of the 9.7 trillion KRW increase recorded in August.
Household loans have been steadily rising since turning to an upward trend with a 4.1 trillion KRW increase in April. In particular, August saw a significant increase of 9.7 trillion KRW. The slowdown in the growth rate in September is mainly attributed to the implementation of the stress DSR (Debt Service Ratio) which reduced borrowers' loan limits and the tightening of loan regulations by banks.
Looking at loan types, mortgage loans increased by 6.9 trillion KRW in September. Although this is a decrease compared to the 8.5 trillion KRW increase in August, it still remains at a high level. The main factor was the decrease in bank mortgage loans from 8.2 trillion KRW in August to 6.2 trillion KRW in September. On the other hand, other loans such as credit loans decreased by 1.7 trillion KRW, showing a contrasting movement.
By financial sector, both banks and secondary financial institutions saw a slowdown in household loan growth. Bank household loans increased by 5.7 trillion KRW in September, significantly down from the 9.2 trillion KRW increase in August. Notably, other loans in the banking sector shifted from an increase of 1.1 trillion KRW in August to a decrease of 0.5 trillion KRW in September. Household loans in the secondary financial sector increased by 0.7 trillion KRW in September, up from 0.3 trillion KRW in August, but overall showed a decline due to a sharp drop of 1.2 trillion KRW in other loans.
Within the secondary financial sector, household loan balances decreased by 0.4 trillion KRW, 0.4 trillion KRW, and 0.2 trillion KRW in mutual finance, credit card companies, and savings banks respectively. In contrast, insurance companies’ household loans increased by 0.4 trillion KRW.
The financial authorities evaluated this as a "slowdown in the rise of household debt," but maintained their stance that household debt must be managed with high vigilance considering the still high increase levels and seasonal factors such as the Chuseok holiday. They also emphasized, "Since household debt growth can expand at any time depending on interest rate and real estate conditions, we are reviewing additional household debt management measures keeping all possibilities in mind."
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