Household Loan Growth Shrinks by 3.8 Trillion Won in August... Mortgage Loans Rise Again

Household Loans Increase by 2.6 Trillion Won Across All Financial Sectors in August
Other Loans Turn to Decline Amid Reduced Credit Lending
Total Loan Management to Continue with Autumn Moving Season and Group Loan Demand

Last month, the increase in total household loans across all financial sectors decreased by 3.8 trillion won compared to the previous month. Although mortgage loans rose further due to increased housing transactions and a higher number of move-ins, the overall growth in household lending was dampened as other loans, especially unsecured credit loans, switched to a declining trend. However, as the fall moving season and demand for group loans continue to pose a possibility of further mortgage loan growth, financial authorities plan to maintain strict oversight of total household debt management.

According to the Financial Services Commission on September 9, household loans from all financial institutions in August increased by 2.6 trillion won from the previous month. Compared to the increase of 6.4 trillion won in July, the monthly growth shrank by 3.8 trillion won. The amount of new household loans, which had already decreased from 9.3 trillion won in May to 8.3 trillion won in June, continued to slow over two consecutive months, recording 6.4 trillion won in July and 2.6 trillion won in August.

Mortgage loans, which had slowed in July, rebounded last month. In August, mortgage loans rose by 4.3 trillion won, up by 700 billion won from the month before. The increase was seen both in the banking sector and in the secondary financial sector, with banks adding 4 trillion won and secondary financial institutions adding 300 billion won, further widening the increase in both segments compared to the previous month.

This trend was influenced by an uptick in housing transactions and a spike in the number of new move-ins, which led to a rise in final payment loans. The analysis suggests that, as the temporary suspension of heavier capital gains tax ended in May, housing transactions increased, and, with the additional increase in new move-in volumes in July and August, demand for mortgages expanded.

Other loans fell by 1.7 trillion won, reversing the increase of 2.8 trillion won recorded the previous month. This change was largely driven by a drop in unsecured credit loans. Within the 'other loans' segment, credit loans turned from a 2.1 trillion won increase in the previous month into a decline of 500 billion won, contributing to the reduction in overall 'other loans.'

By sector, household loans from banks increased by 3.4 trillion won, marking a smaller rise compared to the increase of 5.5 trillion won in the previous month. Among these, the amount of bank-originated mortgage loans grew from 2.5 trillion won to 2.9 trillion won, and policy loans expanded from 1 trillion won to 1.1 trillion won, both in greater amounts than before. Conversely, other loans from banks reversed from a 2 trillion won increase in the prior month to a decrease of 600 billion won in August.

In the secondary financial sector, household loans decreased by 800 billion won, switching from an increase of 900 billion won the previous month to a decline. The decrease in mutual savings banks loans narrowed from 600 billion won to 500 billion won, while savings banks saw their loan growth slow from 500 billion won to 300 billion won. Insurance companies and credit finance companies also switched from growth in July to declines in August.

During a joint meeting on household debt management held that day, Shin Jin-chang, Secretary General of the Financial Services Commission, explained, "August mortgage loans increased compared to the previous month due to a surge in housing transactions before the end of the capital gains tax suspension and an increase in final payment loans stemming from higher move-in volumes in July and August. At the same time, a shift to self-regulation in the financial sector led 'other loans' to turn negative for the first time in four months, resulting in a slowdown in overall household loan growth."

He also noted that seasonal demand for funds during the fall relocation period and the management of group loans under the August 13 real estate measures could lead to a continued rise in mortgage loans. Accordingly, financial authorities will strive to supply funds to genuine end-users while maintaining overall household loan cap management in parallel.

In addition, in line with the recent adjustment of total lending targets, funds necessary for housing supply, youth housing stability, and the needs of genuine end-users will be promptly supplied, but each financial institution is expected to strictly meet its own management goals for the overall loan cap.

Secretary General Shin stated, "Going forward, we will continue efforts to improve the structure of household debt from a qualitative perspective by reviewing the status of fixed-rate mortgage loans in the financial sector and encouraging the launch of long-term fixed-rate mortgage products in the banking sector."

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