Last month, major commercial banks in South Korea saw household loans increase by nearly 4 trillion won. Mortgage loans surged by over 2 trillion won, while demand for investment loans continued despite stock market fluctuations, leading to a rise in overdraft accounts by around 1 trillion won. This trend reflects a rush to secure loans ahead of tightening regulations.
According to the financial sector on August 2, the outstanding household loans from the five largest banks—KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup—reached 778.79 trillion won as of July 30, marking an increase of 3.83 trillion won from the end of June (774.96 trillion won). This marks the second consecutive month of increases around 4 trillion won, following June's rise of 4.14 trillion won.
The expansion in household loans was primarily driven by mortgage loans. During the same period, the outstanding mortgage loans from these banks rose to 617.43 trillion won, an increase of 2.28 trillion won from the previous month. This is the largest increase in 11 months since August of last year, when it rose by 3.70 trillion won. Despite banks reducing mortgage loan limits and imposing restrictions, demand for home purchases has led to significant growth.
Overdraft accounts also increased to 44.47 trillion won, up by 1.19 trillion won compared to the previous month. This marks the third consecutive month of increases exceeding 1 trillion won, following rises of 1.86 trillion won in May and 1.83 trillion won in June. The fluctuations in the KOSPI index, which fell to around 5,200 points on July 29, have spurred demand for investment loans as investors seek to buy at lower prices.
As banks continue to raise lending thresholds, the significant increase in household loans is adding to their burdens. The increase in household loans, excluding policy-based loans from the five major banks, has reportedly exceeded the annual target set by the Financial Supervisory Service (approximately 4.34 trillion won) by over 1 trillion won.
As a result, the market anticipates a stronger upward trend in loan interest rates in the second half of the year. The Bank of Korea has hinted at the possibility of further interest rate hikes during its monetary policy committee meeting this month, adding to the pressure on loan management. Some analysts predict that fixed mortgage rates could exceed 8% by the end of the year.
As of July 31, the fixed mortgage rates from the five major banks (based on 5-year financial bonds) ranged from 4.74% to 7.50%. Compared to the end of last year (3.93% to 6.23%), the upper limit has increased by 1.27 percentage points, and the lower limit has risen by 0.81 percentage points this year. Variable mortgage rates are currently lower, ranging from 4.13% to 6.38%, but are also expected to rise due to ongoing increases in the COFIX index. Credit loan rates have also surpassed 6% at the upper limit since last month.
A representative from a major bank stated, "To prevent a 'balloon effect' where demand shifts to other banks, we may see a gradual increase in interest rates. The potential for additional interest rate hikes and stricter household loan management will likely increase borrowers' interest burdens further."
According to the financial sector on August 2, the outstanding household loans from the five largest banks—KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup—reached 778.79 trillion won as of July 30, marking an increase of 3.83 trillion won from the end of June (774.96 trillion won). This marks the second consecutive month of increases around 4 trillion won, following June's rise of 4.14 trillion won.
The expansion in household loans was primarily driven by mortgage loans. During the same period, the outstanding mortgage loans from these banks rose to 617.43 trillion won, an increase of 2.28 trillion won from the previous month. This is the largest increase in 11 months since August of last year, when it rose by 3.70 trillion won. Despite banks reducing mortgage loan limits and imposing restrictions, demand for home purchases has led to significant growth.
Overdraft accounts also increased to 44.47 trillion won, up by 1.19 trillion won compared to the previous month. This marks the third consecutive month of increases exceeding 1 trillion won, following rises of 1.86 trillion won in May and 1.83 trillion won in June. The fluctuations in the KOSPI index, which fell to around 5,200 points on July 29, have spurred demand for investment loans as investors seek to buy at lower prices.
As banks continue to raise lending thresholds, the significant increase in household loans is adding to their burdens. The increase in household loans, excluding policy-based loans from the five major banks, has reportedly exceeded the annual target set by the Financial Supervisory Service (approximately 4.34 trillion won) by over 1 trillion won.
As a result, the market anticipates a stronger upward trend in loan interest rates in the second half of the year. The Bank of Korea has hinted at the possibility of further interest rate hikes during its monetary policy committee meeting this month, adding to the pressure on loan management. Some analysts predict that fixed mortgage rates could exceed 8% by the end of the year.
As of July 31, the fixed mortgage rates from the five major banks (based on 5-year financial bonds) ranged from 4.74% to 7.50%. Compared to the end of last year (3.93% to 6.23%), the upper limit has increased by 1.27 percentage points, and the lower limit has risen by 0.81 percentage points this year. Variable mortgage rates are currently lower, ranging from 4.13% to 6.38%, but are also expected to rise due to ongoing increases in the COFIX index. Credit loan rates have also surpassed 6% at the upper limit since last month.
A representative from a major bank stated, "To prevent a 'balloon effect' where demand shifts to other banks, we may see a gradual increase in interest rates. The potential for additional interest rate hikes and stricter household loan management will likely increase borrowers' interest burdens further."
* This article has been translated by AI.
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