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

Household loans by major banks declined for the first time in six months last month, according to data released on Thursday. This drop occurred amidst tightened borrowing rules and higher interest rates, as reported by the banks. The total outstanding household loans at the five major lenders - KB Kookmin Bank, Shinhan Bank, Hana Bank, Woori Bank, and NH Nonghyup Bank - amounted to 780.83 trillion won ($575 billion) at the end of September, marking a decrease of 1.28 trillion won compared to the previous month.

The decline in household loans was primarily driven by a reduction in credit loans, which dropped by 1.34 trillion won in September. Mortgage loans, on the other hand, continued to grow, increasing by 125 billion won during the same period, reaching a total of 621.39 trillion won by the end of September.

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