Why Did Household Loans by Major Banks in S. Korea Rise in July, Despite Slowing Growth?
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Synopsis
In July, household loans from South Korea's top banks rose, but the growth rate slowed significantly. This change is attributed to the government's stricter measures to control household debt, impacting the housing market. What does this mean for the future of borrowing in the country?
Key Takeaways
- Household loans from major banks rose but at a slower pace.
- Government measures are aimed at controlling household debt.
- The cap on mortgage lending is now set at 600 million won.
- Interest rates remain stable amid housing market concerns.
- Projected loan growth for July is significantly lower than June.
Seoul, July 13 (NationPress) The volume of household loans provided by five leading banks in South Korea experienced an uptick within the initial ten days of this month. However, the rate of growth has significantly diminished as the government intensifies its measures to manage household debt.
The total outstanding household loans from these five major commercial banks, including KB Kookmin Bank and Shinhan Bank, reached 755.7 trillion won (approximately US$547.8 billion) as of Thursday, reflecting an increase of 891.2 billion won since the end of June, according to the latest data.
This equates to a daily rise of 89.1 billion won over the ten-day period in July, a stark contrast to the daily growth of 225.1 billion won witnessed in June, as reported by Yonhap news agency.
If this trend persists until the month’s conclusion, household loans are projected to grow by 2.76 trillion won in July, a significant drop from the 6.75 trillion won increase recorded in the previous month.
Breaking it down by category, outstanding home-backed loans surged by 1.38 trillion won to a total of 600.8 trillion won during this ten-day period.
Conversely, unsecured loans saw a decline of 137.7 billion won, reversing the previous month’s 1.09 trillion won gain.
Industry experts attribute this slowdown to the stringent debt control measures implemented by financial authorities late last month, aimed at cooling the overheated housing market in Seoul.
Under the newly established regulations, mortgage lending for home purchases in the capital region will be limited to 600 million won.
In a related development, South Korea's central bank has opted to maintain its benchmark interest rate, exercising caution in light of rapidly escalating housing prices, increasing household debt, and uncertainties linked to the United States' tariff policy.
In a widely anticipated decision, the Monetary Policy Board of the Bank of Korea (BOK) decided to keep its key rate steady at 2.5 percent during a recent meeting in Seoul.
This decision follows a rate cut in May, when the BOK reduced the policy rate by 25 basis points to stimulate economic growth amid sluggish domestic demand and uncertainties arising from the sweeping tariff measures imposed by the United States.
Point of View
We recognize the delicate balance between supporting economic growth and managing household debt. The current measures taken by financial authorities are essential in ensuring a stable housing market and preventing further inflation of property prices.
NationPress
13/07/2025
Frequently Asked Questions
What caused the slowdown in household loan growth in South Korea?
The slowdown is primarily due to the government's enhanced debt control measures aimed at curbing household debt and cooling the housing market.
How much did household loans increase in July?
Household loans are expected to rise by 2.76 trillion won in July, a significant decrease compared to the 6.75 trillion won increase in June.
What is the new cap on mortgage lending in Seoul?
Under the new regulations, mortgage lending for home purchases in the capital region is capped at 600 million won.
What decision did the Bank of Korea make regarding interest rates?
The Bank of Korea decided to keep its benchmark interest rate unchanged at 2.5 percent to manage rising housing prices and household debt.
What are the implications of the current housing market situation?
The current housing market situation suggests potential challenges for borrowers and may lead to a cautious approach from both lenders and the government.
