Household Loans Up 6.2 Trillion Won in July... Growth of Mortgages and Unsecured Loans Slows for Second Month

Financial Services Commission Holds Expanded Household Debt Inspection Meeting
Lee Eogwon: "Ensure Funding for Genuine End Users While Suppressing Speculative Demand"

In July, household loans across all financial sectors increased by more than 6 trillion won. Although the growth slowed due to the financial authorities' strengthening of total household loan management and the stock market decline, which curbed the growth of both mortgage loans and personal loans, the overall increase remained at a high level. With the so-called 'loan disbursement crisis' and 'loan open run' incidents, the government has decided to expand the total loan supply by an additional 30 trillion won this year to support genuine demand, raising the possibility that the rate of increase could rise again in the future.

On August 14, Lee Eogwon, Chairman of the Financial Services Commission, held an expanded household debt inspection meeting at the Government Complex Seoul together with relevant agencies, where he reviewed household loan trends for July.

Lee Eokwon, Chairman of the Financial Services Commission, is speaking at the expanded household debt inspection meeting held on the 14th at the Korea Federation of Banks in Jung-gu, Seoul. Photo by Yonhap News

According to the Financial Services Commission, household loans across all financial sectors rose by 6.2 trillion won in July compared to the previous month. After surging from 3.5 trillion won in April to 9.3 trillion won in May, the increase slowed to 8.3 trillion won in June and 6.2 trillion won in July, marking two consecutive months of deceleration. Nevertheless, last month still saw a high increase in the 6 trillion won range. The cumulative increase from January to July reached 35.3 trillion won, already surpassing the government's annual net increase target of around 30 trillion won.

The rate of increase slowed for both mortgage loans and other loans. In July, mortgages increased by 3.5 trillion won and other loans by 2.7 trillion won, both below the previous month's increases of 4.5 trillion won and 3.8 trillion won, respectively. In particular, the slowdown in other loans was led by a reduction in the increase of personal loans, which decreased from 2.6 trillion won to 2 trillion won.

By sector, household loans at banks rose by 5.4 trillion won in July, a decrease of 2.2 trillion won compared to the previous month's 7.6 trillion won increase. Specifically, bank-originated mortgages increased by 2.5 trillion won, and policy loans by 900 billion won, each 400 billion won and 500 billion won less than the previous month. Other loans increased by 2 trillion won, down by 1.3 trillion won from the previous month.

In the non-bank sector, household loans rose by 800 billion won, mainly led by savings banks and credit finance companies, matching the increase from the previous month.

Chairman Lee stated, "Despite seasonal factors such as increased demand for funds during the summer vacation period, active voluntary management measures by financial institutions have contributed to the slowdown in the increase of both mortgage and other loans in July." He added, "Nevertheless, with ongoing expectations for rising prices centered on the Seoul metropolitan area, increases in housing transaction volumes, and seasonal demand for funds during the vacation period, risk factors remain present. Therefore, it is necessary to closely monitor household loan trends and manage them thoroughly."

A loan counter at a bank in Seoul city. Photo by Yonhap News

However, with the government greatly raising the total household loan target, there is a possibility that the rate of increase could rise again in the future. In its 'Comprehensive Financial Measures for Real Estate Market Stabilization' announced the previous day, the Financial Services Commission doubled this year's target growth rate for household loans across all financial sectors from the previous 1.5% to 3.0%. Accordingly, this year's net increase target for household loans will rise from about 30 trillion won to around 60 trillion won. The Financial Supervisory Service plans to adjust firm-by-firm targets in consultation with financial institutions.

Chairman Lee called on financial institutions to ensure smooth fund supply to genuine demand, such as loans for migration costs, interim payments, and balance payments, while simultaneously suppressing speculative demand, following the increase in the total volume target.

He said, "Since lending regulations have a direct impact on borrowers' funding plans, it is very important for financial institutions to carefully consider those borrowers who are at the regulatory threshold on the ground," stressing, "However, caution is needed so that this adjustment of the total loan volume target is not perceived by the market as a relaxation of loan management policies that may stimulate speculative demand."

This content was produced with the assistance of AI translation services.