Recent increases in mortgage loans, driven by rising home prices in the metropolitan area, have been accompanied by a resurgence in demand for credit loans, which have grown by over 1 trillion won in just one month. Analysts suggest that investors are seizing the opportunity to buy low amid a declining stock market. However, concerns are mounting that the burden of repayment may increase for borrowers due to the potential for further interest rate hikes, especially as the KOSPI index struggles to rebound.
According to financial sources, as of October 22, the total household loan balance from the five major banks (KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup) reached 783.44 trillion won, an increase of 2.6058 trillion won from the end of last month. After a decline of 1.2852 trillion won in September, this marks a return to growth for household loans after a month.
Notably, the balance of credit loans rose to 109.35 trillion won, increasing by 1.121 trillion won compared to the previous month, surpassing the growth in mortgage loans. This marks the first increase in three months and accounts for approximately 43% of the total increase in household loans. Investors appear to be utilizing loans to capitalize on the recent stock market downturn, which saw the KOSPI drop by 2.08% last week and the KOSDAQ fall by 5.42%.
The balance of mortgage loans also increased to 622.40 trillion won, up by 999.5 billion won from the end of last month. This is a significant rise compared to the mere 125.2 billion won increase in September, indicating a renewed demand for loans likely spurred by rising home prices. According to KB Real Estate, the average sale price of apartments in Seoul rose by 0.61% compared to the previous month.
However, the increase in loans coincides with rising interest rate pressures. Although the Bank of Korea held the base rate steady at 3% on October 22, Governor Lee Hwan-seong mentioned the possibility of a quicker-than-expected economic recovery and rising prices, leading to speculation about a potential rate hike in November.
The impact of rising interest rates may be felt more acutely by vulnerable borrowers. A report on financial stability released by the Bank of Korea last month indicated that the response of delinquency rates to interest rate hikes is most pronounced among vulnerable borrowers about nine months after a rate increase, compared to about 15 months for households and businesses. This suggests that the effects of the rate hikes in July and August could increase delinquency pressures on vulnerable borrowers in the first half of next year.
The delinquency rate for household loans in the banking sector has already begun to rise. As of the end of August, the delinquency rate for household loans was 0.45%, up 0.03 percentage points from the previous month. The delinquency rate for mortgage loans also increased to 0.31%, rising by 0.02 percentage points.
Kim Sang-bong, a professor of economics at Hansung University, stated, "Even if interest rates rise, it is difficult for homeowners to sell their properties immediately, which means the burden of interest payments may persist for a long time. As interest burdens grow, borrowers may find themselves in a position where they need to cut back on spending and reduce consumption."
* This article has been translated by AI.
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