Bank Household Loans Rise by 5.4 Trillion Won in July... "Need to Monitor Impact of Stronger Holding Tax and Expanded Lending"

Growth in Mortgage and Other Loans Slows from Previous Month
"August Policy Changes in Real Estate Make Future Outlook Uncertain"

Bank Demand Deposits See Record Decline
"Seasonal Effects Combined with Shift to Time Deposits"

The increase in household loans from banks exceeded 5 trillion won in July. The rise in housing transactions in the Seoul metropolitan area led to a further expansion of housing-related loans. However, stricter regulation on unsecured loans by banks and a decline in the stock market, which cooled the trend of 'debt-fueled investments,' resulted in a smaller increase compared to the previous month.

A view of a commercial bank in Seoul. Photo by Yonhap News

According to the "Financial Market Trends for July 2026" released by the Bank of Korea on August 14, the outstanding balance of household loans from banks at the end of July stood at 1,194.8 trillion won, up by 5.4 trillion won from the end of the previous month.

Although this increase was smaller than that observed in June (up by 7.6 trillion won), which was the highest since August 2024 (up by 9.2 trillion won), the level nonetheless remained high.

Last month, the outstanding balance of mortgage loans reached 948.4 trillion won, increasing by 3.4 trillion won from the previous month. The rise in housing transactions in Seoul and other metropolitan areas between April and May had a lagged effect on mortgage loans. However, due to the continued decline in the volume of lease transactions and a slowdown in demand for interim payments on new housing supply, the pace of growth slowed compared to the previous month (up by 4.3 trillion won). Leasehold loan balances, which are included in mortgage loans, decreased by 800 billion won. This marks the eleventh consecutive month of decline since September last year.

Other loans increased by 2 trillion won. The growth was smaller than the previous month, partly due to reduced stock investments by individuals, but the pace remains high relative to previous years. In fact, individuals' net purchases of stocks shrank dramatically from 52 trillion won in June to 3.4 trillion won in July.

Lee Seung-yeop, Chief of the Market Management Team at the Bank of Korea's Financial Markets Department, stated, "Although the increase in household loans in July was smaller than in the previous month, it still exceeds the usual historical level, so we are closely monitoring the situation." He added, "Changes to real estate-related policies—such as the tax reform announced on August 3 and the financial support measures on August 13—could have complex effects on loan demand after August, and we are also keeping a close watch on this." Regarding the outlook for mortgage loans, he commented, "The total volume has increased, but the actual trend in household lending depends on many factors besides loan demand, including banks' lending attitudes and overall market conditions, so it's difficult to make definitive forecasts."

He also projected that other loans, such as unsecured credit, are likely to stabilize further. Lee said, "Other loans increased as stock investing drove up unsecured credit, but with the sharp correction in the stock market, growth momentum is subsiding. If the stock market stabilizes, other loans are also likely to settle down."

Meanwhile, corporate lending by banks increased by 7.7 trillion won, a much bigger gain compared to the previous month (up by 5.1 trillion won). Loans to large companies rose by 3.8 trillion won, as demand for working capital to repay corporate bonds continued, and some interim repayments at the end of the previous quarter were rolled over, amplifying the overall increase. Loans to small and medium-sized businesses also increased by 3.9 trillion won, the result of increased lending operations by some banks and a rise in VAT payment demand.

Banking deposits shrank by 30 trillion won, mainly due to the decline in demand deposits. The volume of demand deposits dropped by 80.8 trillion won from the previous month, largely as funds deposited for end-of-quarter financial ratio management flowed out and some corporate funds shifted to time deposits due to seasonal effects. This represents the largest decrease on record. Time deposits, meanwhile, surged by 42.3 trillion won during the same period, as banks attracted corporate funds to secure funding for loans and as surplus funds from large corporations were deposited, causing some demand deposits to shift over to time deposits.

Assets under management companies dropped by 42.8 trillion won, with equity funds accounting for much of the decrease. Equity funds fell sharply by 56.2 trillion won compared to the previous month, reflecting the effect of declining stock prices. In contrast, money market funds (MMF) increased by 27.2 trillion won during the same period, as corporate funds that had been temporarily withdrawn at quarter-end flowed back in.

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