Seoul: Household loans extended by South Korean banks fell for the first time in 11 months in December amid tightened lending regulations aimed at cooling the overheated property market in the capital region, central bank data showed Wednesday. Banks' outstanding household loans stood at 1,173.6 trillion won (US$794.7 billion) as of end-December, down 2.2 trillion won from a month earlier, according to the data from the Bank of Korea (BOK).
According to Yonhap News Agency, this marks the first on-month decline since January 2025, when household loans dipped 0.5 trillion won. In December, home-backed loans fell 0.7 trillion won on-month, following a 0.8 trillion-won increase the previous month. This decline is the first since February 2023, when mortgage loans dropped 0.3 billion won. Unsecured and other types of household loans also saw a decrease of 1.5 trillion won, after rising 1.2 trillion won in November.
Loans extended to households by all financial institutions declined by 1.5 trillion won, with mortgage loans rising 2.1 trillion won last month, slowing from the previous month's 3.1 trillion-won rise. The data also indicated that household loans increased by 37.6 trillion won last year, a decrease from 41.6 trillion won the previous year.
The tightened rules announced in mid-October resulted in the government designating 21 more districts in Seoul as speculative zones, placing all 25 districts in the capital under stricter regulations. Lending limits were also toughened, capping mortgage loans at as little as 200 million won.
Furthermore, the data showed that corporate loans fell 8.3 trillion won on-month in December, following a 6.2 trillion-won increase the previous month. Outstanding corporate loans stood at 1,363.9 trillion won at the end of December, the BOK reported.
The central bank is widely expected to keep its policy rate unchanged at 2.5 percent this week to support the weakening currency and ease an unsettled property market. The BOK held the key rate steady for four consecutive meetings through November, after entering an easing cycle in October 2024.