On June 11, the Financial Services Commission reported that household loans across all financial sectors surged by 9.3 trillion won in May compared to the previous month. This increase far exceeds the previous month’s rise of 3.5 trillion won and last year’s figure of 5.9 trillion won for the same month.
The spike in household loans is attributed to a combination of active real estate transactions and a booming domestic stock market.
Notably, other loans, including credit loans, rebounded sharply from a decrease of 2 trillion won in April to an increase of 5.3 trillion won in May. This surge is linked to the trend of 'investment debt' driven by rising stock prices and increased cash demand during the family month. In fact, of the 3.7 trillion won increase in other loans from banks, 2.6 trillion won came from limit loans such as overdrafts.
The increase in housing loans slightly decreased from 5.5 trillion won in the previous month but remained high at over 4 trillion won. This is believed to be influenced by the recent uptick in housing transactions and the execution of previously approved group loans. According to the Ministry of Land, Infrastructure and Transport, the nationwide housing transaction volume in April reached 69,755, marking a 6.6% increase from the same month last year.
The trend of rising loans is also rapidly spreading to the second financial sector. Household loans in this sector increased by 2.3 trillion won from the previous month, significantly up from the prior month’s increase of 1.4 trillion won. While the increase in mutual finance decreased from 2.1 trillion won to 700 billion won, sectors such as insurance (900 billion won), specialized credit finance (600 billion won), and savings banks (200 billion won) have shifted to a growth trend, contributing to the overall increase.
Financial authorities anticipate that the pressure for household debt to rise will continue due to the ongoing increase in housing transactions and the growing demand for credit loans driven by the strong stock market. Given that household debt has reached record levels this year, authorities are taking the situation seriously and plan to strengthen loan regulations further.
Banks are also actively cooperating with government policies to curb the rising trend of credit loans that have fueled investment debt. They are reducing new limits for high-income earners and encouraging early repayments through waivers on prepayment fees. Banks are expected to develop detailed implementation plans considering their management goals and strategies and to promptly execute related measures.
Shin Jin-chang, head of the Financial Services Commission’s Secretariat, stated, "Now is the time for all financial sectors to thoroughly manage household debt," adding, "We will maintain the emergency management system until the trend of household debt stabilizes and will implement additional measures as needed." He further emphasized, "The government maintains a consistent and firm stance on household debt management."
* This article has been translated by AI.
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