Regulatory Alerts2024-10-11 | 83194Household Loans, September 2024
The Financial Services Commission reported that household loan balances rose by KRW 5.2 trillion in September 2024, marking a deceleration from the previous month's growth. This slowdown was primarily driven by the implementation of the second phase of the stressed debt service ratio rule and banks' self-regulatory efforts to strengthen loan management. Authorities remain vigilant regarding high loan growth rates and will continue to review additional measures to ensure stable household debt management.
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Household Loans, September 2024 Oct 11, 2024
In September 2024, the outstanding balance of household loans across all financial sectors rose KRW5.2 trillion (preliminary), growing at a slower pace compared with the previous month (up KRW9.7 trillion) .
- Change (in trillion KRW, m-o-m): +4.1 (Apr 2024), +5.3 (May), +4.2 (Jun), +5.2 (Jul), +9.7 (Aug), +5.2 (Sep) p
(By Type)
Home-backed mortgage loans rose KRW6.9 trillion, increasing at a slower pace compared with the previous month (up KRW8.5 trillion) . Mortgage loans in the banking sector also rose at a slower pace from a month ago (up KRW8.2 trillion → up KRW6.2 trillion) .
Other types of loans declined in both the banking (up KRW1.1 trillion → down KRW0.5 trillion) and nonbanking (up KRW0.1 trillion → down KRW1.2 trillion) sectors.
(By Sector)
The pace of household loan growth decelerated in both the banking and nonbanking sectors compared with the previous month.
In September, banks saw an increase of KRW5.7 trillion in household loans, a slowdown from KRW9.2 trillion a month ago. This is mainly attributable to a slower pace of mortgage loan growth in the banking sector (up KRW8.2 trillion → up KRW6.2 trillion) , backed by the effects of implementing the second phase stressed debt service ratio (DSR) rule from September and the banking sector’s self-driven moves to strengthen household loan management. Other types of loans, such as credit loans, in the banking sector edged down KRW0.5 trillion from the rise of KRW1.1 trillion a month ago.
In the nonbanking sector, mortgage loans went up at a faster pace (up KRW0.3 trillion → up KRW0.7 trillion) compared with the previous month, but other types of loans fell KRW1.2 trillion from the increase of KRW0.1 trillion a month ago due mainly to the effects of bad debt write-offs at the end of the quarter. Mutual finance businesses (down KRW0.4 trillion) , specialized credit finance businesses (down KRW0.4 trillion) , and savings banks (down KRW0.2 trillion) saw drops in household loans, while insurance companies (up KRW0.4 trillion) saw an increase.
(Assessment)
The pace of household loan growth slowed down in September as the effects of tighter lending regulation (second phase stressed DSR rule) began to show and banks have stepped up their own efforts to manage household debt. However, as household loans continue to grow at high rates and considering the effects of seasonal factors, such as the Chuseok holiday, authorities will continue to stay vigilant to ensure stable management of household debt.
In addition, as it is possible that the pace of household debt growth may pick up in the future depending on interest rates and housing market situations, authorities will continue to review additional measures to effectively manage household debt.
- Please refer to the attached PDF for details.
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