In the second quarter of this year, South Korea's household debt exceeded 2000 trillion won for the first time. The increase in housing transactions and investment demand due to a strong stock market contributed to a nearly 26 trillion won rise in just three months. This increase is the largest since the third quarter of 2021.
According to the Bank of Korea's 'Preliminary Household Credit Statistics for Q2 2026' released on August 19, the household credit balance reached 2019.8 trillion won at the end of June, marking the highest level since the relevant statistics were first published in the fourth quarter of 2002. The increase in the second quarter was 25.9 trillion won, the largest since the third quarter of 2021, which saw an increase of 34.8 trillion won.
Household credit is a comprehensive measure of household debt, including loans from banks, insurance companies, and public financial institutions, as well as money spent on credit cards. Since returning to an upward trend in the second quarter of 2024, household credit has increased for nine consecutive quarters.
Among household loan products, the balance of housing-related loans rose by 12.2 trillion won to 1190.8 trillion won, significantly higher than the previous quarter's increase of 8.1 trillion won, driven by increased housing transactions. The balance of other loans, including credit loans, increased by 12.8 trillion won to 700.5 trillion won, the largest increase since the third quarter of 2021.
Kim Sung-jun, head of the Bank of Korea's Financial Statistics Team, stated, "In the second quarter, housing-related loans and other loans each increased by about half. The rise in housing-related loans was influenced by increased housing transactions and demand for loans related to pre-sold homes before the lifting of the transfer tax. Additionally, the significant increase in other loans was due to a rise in credit loans from deposit banks and securities firms, which was notably large compared to past trends due to strong stock market performance in the second quarter."
With household debt surpassing 2000 trillion won and rising interest rates, concerns are growing about the repayment burden on vulnerable borrowers. The Bank of Korea noted in its June Financial Stability Report that while the delinquency rate on household loans remains below the long-term average, the proportion of vulnerable borrowers with insufficient repayment capacity has increased. According to the Bank of Korea, the proportion of vulnerable borrowers at the end of the first quarter of this year was 6.7%, up from 6.4% at the end of the third quarter of 2025.
The overall level of financial market instability remains high. The Financial Stability Index (FSI), which indicates the short-term stability of the financial system, stood at 16.9 in June, higher than the end of last year’s 16.0, remaining in the 'caution' phase (above 12). The Financial Vulnerability Index (FVI), which reflects medium- to long-term financial vulnerabilities, was 46.0 in the first quarter of this year, exceeding the long-term average of 45.7. Particularly, if expectations for rising real estate prices grow, household debt will increase, which could further drive up housing prices, accumulating financial vulnerabilities in the long term.
This accumulation of financial imbalances is expected to support the need for further interest rate hikes by the Bank of Korea. During last month's Monetary Policy Committee meeting, one committee member remarked, "Given the heightened awareness of financial stability risks associated with credit expansion and potential asset price increases, we need to respond to inflation and the accumulation of financial imbalances through interest rate hikes." According to the Bank of Korea's analysis, the FVI is projected to decrease by 6.0 in the asset price sector six quarters after an interest rate hike.
* This article has been translated by AI.
Copyright ⓒ Aju Press All rights reserved.