Seoul: Household loan growth in South Korea decelerated in November as banks tightened lending rules to address the overheated property market in the capital region, according to central bank data released Wednesday. The Bank of Korea (BOK) reported that household loans extended by South Korean banks increased by 1.9 trillion won to a total of 1,175.6 trillion won (US$799.62 billion) by the end of November, showing a reduced growth compared to the 3.5 trillion-won increase recorded in October.
According to Yonhap News Agency, the slowdown in loan growth was evident across various categories. Home-backed loans experienced a rise of 700 billion won, reaching 935.5 trillion won, which is a significant deceleration from the 2 trillion-won gain in October, marking the slowest growth since March 2023. Unsecured and other types of household loans increased by 1.2 trillion won to 239.2 trillion won, following a previous month's gain of 1.4 trillion won.
The BOK noted, "Mortgage loans grew at a slower clip despite the increase in housing transactions prior to the Oct. 15 measures, as banks continued to tighten household lending and demand for jeonse loans declined." The government's reinforced regulations in mid-October designated additional districts in Seoul as speculative zones and implemented stricter lending limits, capping mortgage loans at amounts as low as 200 million won.
The unique jeonse system, a significant aspect of the South Korean housing market, involves tenants making a substantial lump-sum deposit that is returned fully at the end of the lease, further influencing the dynamics of the housing and loan markets.
Despite the overall slowdown, the BOK observed that "other household loans continued to increase markedly amid an expansion in both domestic and overseas stock investments." The Korea Composite Stock Price Index (KOSPI) has experienced significant growth, surging nearly 70 percent this year due to factors like the semiconductor market upcycle, optimism surrounding the artificial intelligence boom, and government-led market reform measures.
Data from the Financial Supervisory Service (FSS) also reflected a deceleration in household loans extended by all financial institutions, which rose by 4.1 trillion won in November, down from a 4.9 trillion-won increase in October. Home-backed loans from all financial institutions, including savings banks and insurance firms, increased by 2.6 trillion won, compared to a 3.2 trillion-won rise the previous month.
BOK official Park Min-cheol highlighted the need for continual monitoring, stating, "Overall, the pace of home price increases in the greater Seoul area has been moderating. In some key districts of Seoul, however, the slowdown has been more gradual." He added that while apartment transactions in Seoul have sharply declined, the impact has been less pronounced in Gyeonggi and Incheon, partly due to a ballooning effect, maintaining upward pressure on housing-related loans.
In contrast to household loans, corporate loans saw an increase of 6.2 trillion won in November, up from a 5.9 trillion-won rise in October, with outstanding corporate loans reaching 1,372.2 trillion won by the end of November, according to the BOK.