Seoul: Household loans extended by South Korean banks grew at the slowest pace in six months in September due to tighter lending rules aimed at curbing surging housing prices and household debts, central bank data showed Thursday. Banks' outstanding household loans stood at 1,170.2 trillion won (US$825.07 billion) as of end-September, marking an increase of 2 trillion won from the previous month, according to the data from the Bank of Korea (BOK).
According to Yonhap News Agency, this growth marks a significant reduction from the 4.1 trillion-won gain seen in the previous month and is the slowest growth since March. Home-backed loans increased by 2.5 trillion won from a month earlier, reaching 932.7 trillion won as of end-September, which is a slowdown from the 3.9 trillion-won rise seen in the previous month. In contrast, unsecured and other types of household loans fell by 500 billion won to 236.6 trillion won.
Separate data from the Financial Supervisory Service (FSS) indicated that household loans extended by all financial institutions rose by 1.1 trillion won in September from the previous month, a sharp deceleration from the 4.7 trillion-won gain in the previous month. Home-backed loans provided by all financial institutions, including savings banks and insurance firms, increased by 3.6 trillion won last month, slowing from a 5.1 trillion-won increase in August. Other types of loans extended to households fell by 2.4 trillion won last month, compared to a 400 billion-won decline in the previous month.
A BOK official noted, "The impact of lending regulations persisted, while seasonal factors also reduced demand for jeonse financing." The reduction in credit loan limits also contributed to the decline in other loans. Jeonse is a unique housing rental system in South Korea where tenants make a large lump-sum deposit to landlords instead of paying monthly rent.
To address rising housing prices, the government imposed a 600 million-won cap on mortgage loans for home purchases in the capital region in late June and suspended home-backed lending to multiple homeowners. On Wednesday, the government added 21 districts in Seoul to its list of speculative zones, subjecting all 25 districts in the capital to stricter regulations and introducing tougher lending rules, including lowering the mortgage loan cap to as low as 200 million won.
Apartment prices in Seoul have been steeply increasing, especially in neighborhoods around the Han River, leading to speculative demand and rising price trends, posing a significant policy challenge for the new government under President Lee Jae Myung.
Meanwhile, corporate loans rose by 5.3 trillion won from a month earlier in September, a slowdown from the 8.4 trillion-won increase seen in the previous month. Outstanding corporate loans stood at 1,360.1 trillion won as of end-September, the data showed.