Seoul: Household loans extended by South Korean banks fell for a second consecutive month in January amid tightened lending regulations aimed at stabilizing the housing market, central bank data showed Wednesday. Outstanding household loans stood at 1,172.7 trillion won (US$805.75 billion) at the end of January, marking a decline of 1 trillion won from the previous month.
According to Yonhap News Agency, this marks the first instance of a consistent decline since January 2025, with the trend extending into a second consecutive month. The decrease was observed across different types of loans, with home-backed loans dropping by 600 billion won following a 500 billion-won decline in the previous month. Unsecured and other household loans fell by 400 billion won on a monthly basis, although this was a narrower decline compared to the 1.5 trillion-won decrease recorded in December.
Despite the overall reduction in household loans from banks, loans extended by all financial institutions, including savings banks and insurance firms, saw an increase of 1.4 trillion won in January. This followed a 1.2 trillion-won drop in the preceding month, as reported by the Financial Supervisory Service (FSS). Mortgage loans experienced a notable rise, increasing by 3 trillion won, which was an acceleration from the 2.3 trillion-won increase in December, the FSS noted.
The South Korean government has enacted these tightened regulations in response to the escalating housing prices in Seoul and other parts of the greater metropolitan area. A Bank of Korea (BOK) official stated, "Banks have continued efforts to manage lending in line with government guidelines, while demand for 'jeonse' loans has slowed." The official further noted that despite the influx of early-year bonuses, other types of loans recorded only a marginal decline due to increased investment in domestic and overseas stocks. The 'jeonse' rental system in South Korea involves tenants making a substantial lump-sum deposit that is fully refunded at the lease's conclusion.
In contrast, corporate loans saw an increase of 7.8 trillion won in January, following a 5.7 trillion-won gain the month before. As of the end of January, outstanding corporate loans were reported to be 1,369.6 trillion won.
Looking ahead, a BOK official highlighted the potential for accelerated and more volatile household loan growth in February, as financial institutions initiate full-scale operations in the new year and as demand rises with the approach of the new school year. The central bank reaffirmed its commitment to enhancing market monitoring and management efforts to address these dynamics.