Household debt in South Korea has reached a new record high in the first quarter of this year. Despite the government's stringent lending regulations, non-bank mortgage loans have increased significantly, and investment borrowing has surged due to a booming stock market.
According to the Bank of Korea's preliminary statistics on household credit released on August 19, the total household credit balance at the end of the first quarter stood at 1,993.1 trillion won. This marks an increase of 14 trillion won compared to the end of the previous quarter, setting a record since the related statistics were first published in the fourth quarter of 2002.
Household credit had decreased by 32 trillion won in the first quarter of 2024 amid monetary tightening, but it has shown an upward trend for eight consecutive quarters since then. However, the quarterly increase has slowed compared to the previous quarter's rise of 14.3 trillion won.
Household credit refers to the total debt incurred by households from banks, insurance companies, lending institutions, and public financial institutions, including credit card spending before payment.
Excluding credit card spending, the household loan balance at the end of the first quarter was 1,865.8 trillion won, an increase of 12.9 trillion won from the previous quarter.
By loan type, the mortgage loan balance was 1,178.6 trillion won, reflecting an increase of 8.1 trillion won in the first quarter, marking two consecutive quarters of growth. The increase was attributed to a reduced decline in other financial institutions, including public financial institutions and other financial intermediaries.
Other loans, including credit loans and securities firms' credit extensions, totaled 687.2 trillion won, up 4.8 trillion won from the previous quarter. The increase was primarily driven by a rise in credit extensions from securities firms.
Lee Hye-young, head of the Bank of Korea's Financial Statistics Team, noted, "Securities firms' credit extensions increased by 7.3 trillion won in the first quarter, a significant rise compared to the previous quarter's increase of 3.3 trillion won. This is the third-largest increase on record."
By lending source, the balance of household loans from deposit banks was 1,009.6 trillion won, a decrease of 2 billion won. While mortgage loans increased by 3 billion won, other loans decreased by 6 billion won. The increase in mortgage loans was significantly lower than the previous quarter's rise of 48 billion won.
Household loans from non-bank deposit-taking institutions, including mutual finance, savings banks, and credit cooperatives, amounted to 325 trillion won, reflecting an increase of 8.2 trillion won, largely due to a surge of 10.6 trillion won in mortgage loans. Other loans decreased by 2.5 trillion won.
Lee added, "The increase in deposit banks has slowed significantly, while the rise in non-bank institutions reflects the demand for loans that existed before the financial authorities intensified their management policies."
Regarding the ratio of household debt to gross domestic product (GDP), Lee stated, "Household credit increased by 3.5% year-on-year, while the preliminary real GDP growth rate was 3.6% compared to the same period last year. Based on this, the household debt ratio in the first quarter is expected to decrease further." She continued, "Household credit is showing a gradual stabilization trend, and if the growth rate remains high, it is expected to decrease further."
Looking ahead, she remarked, "Household credit tends to increase as the economy grows. While it does not seem likely to increase significantly in the future, we need to monitor the recent uptick in housing transactions closely."
* This article has been translated by AI.
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