Household Debt Hits 1,927 Trillion Won 'Record High'... "Q1 Growth Trend to Continue Slowing"

Household Debt Rose by 13 Trillion Won in Q4 Last Year, but Growth Slowed from Previous Quarter
Decrease in Housing Sales Curbs Rise in Mortgage Loans
Household Debt Up 2.2% in 2024... "Three Consecutive Years of Downward Stabilization"

In the fourth quarter of last year, household credit (debt) in South Korea continued to rise, reaching 1,927 trillion won, setting a new record high. However, the rate of increase slowed compared to the previous quarter. This was due to a decrease in housing sales transactions, which led to a reduced increase in mortgage loans. Since real estate transactions, which lead mortgage loans by 2 to 3 months, have been slowing since peaking in July last year, the trend of slowing household debt growth is expected to continue into the first quarter of this year.

According to the "2024 Fourth Quarter Household Credit (Provisional)" report released by the Bank of Korea on the 18th, the household credit balance at the end of the fourth quarter last year was 1,927.3 trillion won, an increase of 13 trillion won from the previous quarter. This is a smaller increase compared to the 18.5 trillion won rise in the previous quarter. Household credit refers to comprehensive household debt, which includes loans received by households from banks, insurance companies, and lending institutions, plus pre-settlement card usage amounts (sales credit).

Household credit in South Korea decreased by 3.1 trillion won in the first quarter of last year but turned to an increase of 13.4 trillion won in the second quarter. It continued to rise with increases of 18.5 trillion won in the third quarter and 13 trillion won in the fourth quarter.

Excluding card payments (sales credit) from household credit, the household loan balance at the end of the fourth quarter last year was 1,807 trillion won, up 10.6 trillion won from the previous quarter. However, the increase was smaller than the 16.7 trillion won rise in the previous quarter. The slowdown in housing sales transactions, mainly in the metropolitan area, led to a reduced increase in mortgage loans. At the end of the fourth quarter, mortgage loans increased by 11.7 trillion won from the previous quarter, reaching 1,123.9 trillion won. This was the smallest increase since the first quarter of 2023 (4.4 trillion won increase).

Other loans, including unsecured loans such as credit loans, decreased by 1.2 trillion won compared to the previous quarter, mainly due to reductions in non-housing collateral loans like officetels and securities firms' credit extensions. However, the rate of decrease has been narrowing since the first quarter of last year (-13.2 trillion won).

By lending channel, the household loan balance at deposit banks was 966.1 trillion won, an increase of 6.9 trillion won from the previous quarter. However, with the significant reduction in mortgage loan growth, the increase in household loans at deposit banks also sharply declined compared to 22.7 trillion won in the third quarter of last year.

On the other hand, the household loan balance at non-bank deposit-taking institutions such as mutual finance, mutual savings banks, and credit cooperatives was 310.3 trillion won, turning to an increase of 6 trillion won from the previous quarter. This marked a shift from nine consecutive quarters of decline since the third quarter of 2022 to an increase. This result came from a larger increase in mortgage loans and a smaller decrease in other loans. However, since non-bank deposit-taking institutions have been reducing loans over the past three years to strengthen asset soundness and loans decreased annually last year, it is necessary to monitor whether this trend reversal will continue.

The household loan balance at other financial institutions such as insurance companies, securities firms, and asset securitization companies was 530.6 trillion won, continuing a decline with a decrease of 2.4 trillion won from the previous quarter. Although insurance companies' policy loans increased, the uncertainty in the stock market led to a continued decrease in securities firms' credit extensions.

The sales credit (card payment) balance within household credit in the fourth quarter of last year was 118.1 trillion won. It increased by 2.4 trillion won due to seasonal effects such as increased personal card usage at year-end.

Meanwhile, household credit increased by 41.8 trillion won last year, a 2.2% rise compared to the end of 2023. This was the largest increase in three years since the 133.4 trillion won (7.7%) rise in 2021.

Kim Minsu, head of the Financial Statistics Team at the Bank of Korea's Economic Statistics Department 1, said, "Household credit increased significantly in the third quarter of last year, but due to macroprudential policies such as the implementation of the stress Debt Service Ratio (DSR) in September and banks' loan portfolio management, it stabilized rapidly in the fourth quarter." He added, "Household credit for the entire year of 2024 increased by 2.2% compared to the end of the previous year. Since nominal GDP is growing by more than 6% year-on-year from the first to the third quarter of 2024, the household debt ratio is expected to stabilize downward for the third consecutive year." This aligns with the government's and the Bank of Korea's goal of gradual downward stabilization of the household debt ratio.