South Korea’s household loans expand by $7.32b in August
There were “strong housing market activities” in the Seoul metropolitan area.
Household loans extended by South Korean financial institutions rose by $7.32b (KRW9.8t) in August 2024, according to data from the Financial Supervisory Service (FSS).
This is a steeper rise than the $3.88b (KRW5.2t) in loans added in July, the FSS said.
Authorities observed strong housing market activities in the Seoul metropolitan area.
“Household loans rose steeply in August compared with the previous month due to strong housing market transactions in the Seoul metropolitan area, large demand from borrowers prior to the implementation of the second phase stressed debt service ratio (DSR) rule, and demand for stock investments,” the FSS said in a press release published on 11 September 2024.
Home-backed mortgage loans rose by $6.35b (KRW8.5t) during the same month.
Other types of loans are up $971.23m (KRW1.3t), with banks and non-banks experiencing a shift back up from the drops seen in June.
Banks extended more household loans in August, with total loans growing by $6.95b (KRW9.3t). This is on the back of mortgage loans expanding by $6.13b (KRW8.2t) in August versus just a KRW5.6t rise in July.
Other types of loans rose by KRW1.1t in August, reversing the KRW0.1t contraction in July, thanks to a rise in credit loans.
Household loans extended by the non-banking sector rose by $224.1m (KRW0.3t), versus an approximately $74m (KRW0.1t) decline a month earlier.
Specialized credit finance businesses and savings banks continue to see growth, with loans disbursed rising by $522.94m (KRW0.7t) and $298.82m (KRW0.4t) during the quarter, respectively.
Looking ahead, FSS expects the pace of household debt growth in September to be slower than in August as authorities implement the second phase stressed DSR rule beginning September.
The rule has reportedly begun to impose higher stress rates on mortgage loans issued by banks in the Seoul metropolitan area.
“However, since it is possible that household debt growth may accelerate
anytime due to the seasonal housing demand, rising home prices, and expectations for rate cuts, authorities will continue to closely monitor trends of growth in all types of household loans,” the FSS stated.
(US$1 = KRW1,338.59)