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

Household loans by major South Korean banks decreased for the first time in six months last month, according to data released on Thursday. The decline was attributed to tightened borrowing regulations and higher interest rates, which resulted in a drop of 1.28 trillion won ($575 billion) in outstanding household loans at five major lenders.

These lenders include KB Kookmin Bank, Shinhan Bank, Hana Bank, Woori Bank, and NH Nonghyup Bank. As of the end of September, the total outstanding household loans amounted to 780.83 trillion won.

Household loans had been steadily increasing since April due to a surge in mortgage and credit loans. However, the latest decrease was primarily driven by a fall in credit loans, which dropped by 1.34 trillion won in September alone. Mortgage loans, on the other hand, continued to rise, with a gain of 125 billion won in September to reach a total of 621.39 trillion won at the end of the month.

The Bank of Korea had raised its benchmark interest rate to 3 percent in two consecutive meetings in July and August, marking the first back-to-back rate hikes since January 2023.