March Bank Household Loans Increase by 1.4 Trillion Won "Rapid Rise in Toheoje Housing Transactions Affects Q2"

Bank Household Loans Rise by 1.4 Trillion KRW for Second Month
Growth Slows as Year-End and Early-Year Housing Transactions Decline
Corporate Loans Turn Negative as Companies Reduce Investment and Banks Tighten Credit Risk Management

Last month, bank household loans increased by 1.4 trillion KRW, marking a rise for the second consecutive month. However, the growth slowed compared to the previous month (3.2 trillion KRW). This was due to the reduced increase in mortgage loans (jumdae) caused by the slowdown in housing transactions at the end of last year and early this year, as well as the easing of moving demand for the new school term. The impact of household loans from increased housing transactions following the lifting of the Seoul land transaction permit zone in February is expected to be reflected in the second quarter of this year.

Apartments stand in a row around Gangnam-gu and Seocho-gu, Seoul. Photo by Yonhap News

According to the 'Financial Market Trends in March 2025' released by the Bank of Korea on the 9th, as of the end of last month, the outstanding balance of bank household loans was 1,145 trillion KRW, an increase of 1.4 trillion KRW compared to the end of the previous month. This marks a continuous increase for two months following 3.2 trillion KRW in February.

Among bank household loans, mortgage loans increased by 2.2 trillion KRW to reach 909.9 trillion KRW. However, the increase slowed compared to the previous month's 3.4 trillion KRW due to the slowdown in housing transactions at the end of the year and early this year and the easing of moving demand for the new school term. Jeonse loans, which are included in mortgage loans, increased by 700 billion KRW last month, following increases of 400 billion KRW in January and 1.2 trillion KRW in February.

Housing transactions, which had been sluggish, surged significantly in February. The nationwide apartment sales volume in February was 38,000 units, returning to the level of October last year. The apartment sales volume in Seoul, directly affected by the lifting of the land transaction permit zone, jumped to 6,000 units in February. This is about double the monthly average of 3,000 units maintained since October last year. Park Mincheol, Deputy Head of the Market Management Team at the Bank of Korea's Financial Market Department, said, "After the re-designation of the expanded land transaction permit zone in late last month, Seoul apartment prices have narrowed their rise, and overall housing transactions have also slowed," but added, "Since there are mixed upward and downward factors affecting household loan growth in the market, we will continue to monitor the effects of government measures, future economic conditions, and financial environment trends."

Other loans decreased by 900 billion KRW to 234.2 trillion KRW. The decline widened compared to the previous month (-200 billion KRW) due to seasonal factors such as the sale and write-off of non-performing loans. Other loans include general unsecured loans, credit line loans (overdraft loans), commercial real estate mortgage loans, deposit-secured loans, and stock-secured loans. The total increase in household loans across the financial sector (400 billion KRW) significantly shrank compared to February.

Meanwhile, bank corporate loans turned to a decrease. At the end of last month, the outstanding balance of bank corporate loans was 1,324.3 trillion KRW, down 2.1 trillion KRW from the previous month. This is the first decrease in bank corporate loans in March since March 2005, when it fell by 1.2 trillion KRW. Large corporate loans decreased by 700 billion KRW, mainly in working capital, due to temporary repayments for quarter-end financial ratio management. Small and medium-sized enterprise (SME) loans decreased by 1.4 trillion KRW amid continued weakening loan demand, strengthened credit risk management by major banks, and the sale and write-off of non-performing loans. Deputy Head Park analyzed, "Since the fourth quarter of last year, corporate funding demand has been declining due to domestic and external uncertainties. The March decrease reflects a combination of demand-side factors and supply-side factors such as banks tightening credit risk management and reducing SME loan operations, along with increased sale and write-off of non-performing loans at quarter-end."

Regarding direct financing, corporate bonds saw a reduction in net issuance due to seasonal factors such as financial statement closings and general meetings of shareholders. Net issuance fell from 3 trillion KRW in February to 400 billion KRW last month. Commercial paper (CP) and short-term bonds recorded net repayments of 3.7 trillion KRW due to temporary repayments for quarter-end financial ratio management, increasing the scale of net repayments.

Bank deposits in March reduced their growth from 24.8 trillion KRW in February to 12.3 trillion KRW in March. Time deposits sharply decreased from an increase of 16 trillion KRW in February to a decrease of 12.6 trillion KRW last month, due to weakened incentives for banks to raise funds and withdrawals of local government fiscal execution funds. Demand deposits increased by 31.4 trillion KRW due to corporate fund inflows for quarter-end financial ratio management and dividend payments. Asset management company deposits turned sharply negative from 39.3 trillion KRW in February to -13.1 trillion KRW last month.

Money Market Funds (MMF) decreased by 19.6 trillion KRW due to corporate fund outflows for quarter-end financial ratio management and government fund withdrawals for fiscal execution. Bond funds and other funds increased by 1.5 trillion KRW and 5.5 trillion KRW respectively, with inflows slowing compared to the previous month, while equity funds turned negative from 1.8 trillion KRW in February to 600 billion KRW last month.