Financial Services Commission Announces June Household Loan Trends
Loan Growth Expected to Continue for About Two More Months
Guiding Market Funds Toward Economic Growth Instead of Real Estate
Last month, household loans across all financial sectors increased by 6.5 trillion won compared to the previous month. This marks the largest monthly increase so far this year. As the implementation of the third phase of the DSR (Debt Service Ratio) approaches, there has been a surge in demand to maximize borrowing capacity, leading to a sharp rise in household loans, particularly driven by mortgage loans.
On July 9, the Financial Services Commission announced that it held a household debt review meeting at the Government Seoul Office, attended by the Financial Supervisory Service, the Ministry of Economy and Finance, the Ministry of Land, Infrastructure and Transport, the Bank of Korea, the Korea Federation of Banks, and the five major banks, to discuss future response measures.
In May, household loans across all financial sectors increased by 6.5 trillion won compared to the previous month. This is the largest increase in household loans so far this year. The figure is 700 billion won higher than the sharp increase seen in April, which was 5.3 trillion won.
Last month, the increase in household loans was led by bank mortgages. Mortgage loans alone increased by 6.2 trillion won compared to the previous month. In the banking sector, the increase expanded from 4.1 trillion won to 5.1 trillion won, while in the secondary financial sector, the increase narrowed somewhat from 1.5 trillion won to 1.1 trillion won.
Other loans only increased by 300 billion won compared to the previous month, which is a decrease of 100 billion won from the previous month's increase. This was mainly due to the fact that the increase in credit loans shrank to 700 billion won, down from the previous month.
By sector, household loans in the banking sector in June amounted to 6.2 trillion won, up from 5.2 trillion won in May. Mortgage loans expanded to 3.8 trillion won, up from 2.5 trillion won the previous month, but the increase in policy loans was 1.3 trillion won, 300 billion won less than the previous month. Other loans remained unchanged at 1.1 trillion won.
The increase in household loans in the secondary financial sector was 300 billion won, an expansion of 700 billion won compared to the previous month. Mutual finance institutions saw an increase from 800 billion won to 1.1 trillion won, while savings banks shifted from an increase of 300 billion won to a decrease of 400 billion won.
Daeyoung Kwon, Secretary General of the Financial Services Commission (center), Sehoon Lee, Senior Deputy Governor of the Financial Supervisory Service (right), and others attended the task force meeting of related ministries regarding unsettled payment settlements for Wemakeprice and Tmon at the Government Seoul Office in Jongno-gu, Seoul, on the 29th, engaging in discussion. Photo by Yongjun Cho jun21@
Previously, as the Financial Services Commission became concerned about the rapid increase in household loans, it announced strong measures to tighten household debt management, including limiting the total amount of mortgage loans to 600 million won, and decided to implement them immediately from the following day. The Financial Services Commission plans to focus on discussing and monitoring the implementation of regulations, trends at bank branches, and measures to block circumvention of lending regulations.
However, the commission expects the upward trend in household loans to continue for the time being. Although it is true that applications for bank mortgages have decreased since the announcement of stronger household debt management measures, there is a time lag of about two months due to the volume of housing transactions and the amount of loan approvals that have already taken place.
Daeyoung Kwon, Secretary General of the Financial Services Commission, stated, "The true success of these measures depends on consistently implementing the policy by blocking side effects such as the balloon effect and circumvention methods," and requested, "Financial institutions, which are most familiar with on-site conditions, should proactively identify various types of circumvention methods and prepare countermeasures to be shared across all financial sectors."
He added, "Now is a more critical time than ever for heightened vigilance and consistent risk management," and urged, "Please do your utmost to ensure that market funds do not excessively flow into the housing market, but are actively utilized in productive sectors such as businesses and capital markets, so that they can serve as a catalyst for economic growth and ensure smooth implementation of these measures."
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