In the past two weeks, household loans from the five major banks in South Korea have surged by over 2 trillion won. This rise is attributed to the recovery in the housing market, leading to a significant increase in mortgage loans and a continuous rise in credit loans over the past three months.
Rise in Household Loans
As of June 13, 2024, the balance of household loans from the five major banks (KB, Shinhan, Hana, Woori, and NH Nonghyup) reached 705.3 trillion won, up by 2.1 trillion won from the end of May. This marks the third consecutive month of increase, with a growth similar to that seen in April and May.
Breakdown of Loans
- Mortgage Loans: The balance of mortgage loans, including Jeonse loan funds, increased by 1.9 trillion won to 548.3 trillion won.
- Credit Loans: Credit loans rose by 2.8 trillion won in just 13 days, reaching a total of 103.3 trillion won.
Factors Driving the Increase
The main driver behind this rise is the increase in housing transactions. As housing transactions have picked up, the demand for mortgage loans has also increased. NHALL100 Advisory Center's real estate expert Yoon Sumin noted that the slight drop in mortgage rates compared to last year and concerns over supply shortages have led more people to purchase homes, thus increasing the demand for mortgages.
Housing Market Trends
According to the Korea Real Estate Board, apartment transactions nationwide have been steadily increasing, from 26,934 in December last year to 44,119 in April this year. This upward trend in housing transactions typically influences mortgage loans with a delay of 2-3 months.
Future Outlook
Despite the continuous increase in household loans, banking sector officials anticipate a slowdown in the growth rate in the latter half of the year due to tighter regulations by financial authorities.
- Regulatory Impact: The recently introduced borrower-based Total Debt Service Ratio (DSR) regulation and the Stress DSR implementation are expected to limit the increase in household loans.
- Interest Rates: While the competition among financial institutions might keep mortgage rates stable, the overall increase in household loans may be restricted by these regulations and the anticipated economic conditions.
Conclusion
The rise in household loans reflects the recovering housing market, driven by increased housing transactions and lower mortgage rates. However, with impending regulatory measures, the growth rate is expected to moderate in the coming months.
Experts suggest that potential homebuyers should consider increasing their equity ratio and aim for long-term holdings to mitigate risks associated with external factors.
