Household Loan Limit Raised by 60%... Bank Lending Threshold Remains High
Annual Target Raised to 6.98 Trillion Won, But Increase Already at 6.67 Trillion
Additional Lending Focused on Housing Supply and Actual Demand Borrowers
Group Loans Jump 1.0525 Trillion Won in Just One Month
Although financial authorities have relaxed the total volume regulation for household loans, raising the annual household loan growth target for commercial banks, there appears to be limited room to use this capacity for general household loans. This is because the increase in household loans for this year is already close to the newly allocated target, and a large portion has been assigned to actual demand borrowers, such as young people and those with low-to-mid credit scores. Therefore, it is unlikely that the criteria for general household loans, such as unsecured credit loans or individual mortgage loans, will be significantly eased.
According to the financial sector and related sources on August 30, the annual household loan growth target for the five major banks (KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup) has reportedly been increased by about 60% compared to the previous target. Previously, the five major banks were allowed to increase their household loan balances by around 4.34 trillion won this year, but following the recent adjustment, this figure has expanded to approximately 6.98 trillion won—a combined increase of about 2.64 trillion won for these banks. It should be noted that certain items, such as group loans, are excluded when calculating the performance in total volume management.
This adjustment follows the financial authorities’ decision to raise the annual household loan growth management target from the previous 1.5% to 3.0%. Last week, the five major banks coordinated new targets with the authorities and reportedly received differentiated allocations, reflecting each bank’s loan performance in the first half of the year. However, banks that exceeded their previous targets have been penalized, resulting in smaller additional allocations for those institutions. Detailed targets for each bank are still being negotiated, and distribution for secondary financial institutions is expected to be completed early next week.
As a significant portion of the newly increased lending capacity will be concentrated on supporting actual demand borrowers, the capacity to offer general household loans is predicted to remain limited. The financial authorities have allocated much of the additional resources to support for home purchases and for youth and low-to-mid credit borrowers. As a result, it is estimated that out of the 30 trillion won in new lending capacity, only about 6 trillion to 8 trillion won of new mortgages and credit loans may become available across the entire financial sector.
In addition, the five major banks have already used up a significant portion of this year’s household loan growth target. As of August 27, the outstanding balance of household loans, excluding policy-based lending, at the five major banks stood at 651.6377 trillion won—an increase of 6.6677 trillion won compared to the end of last year (644.9700 trillion won).
When compared to the newly allocated annual increase target of approximately 6.98 trillion won, this leaves only about 300 billion won in remaining capacity. Even considering the exclusion of certain items, such as group loans, from total volume management, this indicates that there is limited additional capacity available for general household loans.
Especially since August, household loan growth has continued, mainly driven by mortgage loans. The increase in group loans was also notable. As of August 27, the total outstanding balance of household loans at the five major banks, including policy-based loans, stood at 781.4377 trillion won—an increase of 2.4586 trillion won from the end of July (778.9791 trillion won).
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Within this, the balance of mortgage loans increased by 2.4761 trillion won from 617.9411 trillion won to 620.4172 trillion won. The balance of group loans surged by 1.0525 trillion won over the course of a month to reach 149.2951 trillion won—the largest monthly increase since September 2024, when it rose by 1.1771 trillion won.
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