Household loans fall for 1st time in six months on tightened rules, higher rates

Household loans by major banks in South Korea declined for the first time in six months last month due to tightened borrowing rules and higher interest rates, according to data released Thursday. Outstanding household loans at the five largest lenders -- KB Kookmin Bank, Shinhan Bank, Hana Bank, Woori Bank, and NH Nonghyup Bank -- were 780.83 trillion won (US$575 billion) at the end of September, a decrease of 1.28 trillion won from the previous month, reported by the banks' data.

Household loans had been steadily increasing since April this year, driven by a rise in mortgage and credit loans. The decline in household loans by banks was primarily due to a drop in credit loans, which fell by 1.34 trillion won last month. Mortgage loans, on the other hand, continued to rise, increasing by 125 billion won in September to reach 621.39 trillion won by the end of last month.

The Bank of Korea increased the benchmark interest rate to 3 percent over two consecutive meetings in July and August, marking the first consecutive rate hikes since January 2023, the first time the central bank had raised the rate at seven straight meetings since April 2022.