Seoul: Household loans extended by South Korean banks rose for the first time in four months in March despite tight regulations, as lending linked to stock investment grew amid a market correction, data showed Wednesday. Outstanding household loans stood at 1,172.8 trillion won (US$792.91 billion) at the end of March, up 500 billion won from a month earlier, according to the data from the Bank of Korea (BOK). Home-backed loans remained unchanged from a month earlier at 934.9 trillion won in March, following a 300 billion-won increase the previous month, due mainly to tighter household lending controls by banks and weakening demand for jeonse loans.
According to Yonhap News Agency, the government has maintained tighter loan and home purchase regulations since last year in response to surging housing prices in Seoul and parts of the greater metropolitan area. Jeonse is a unique housing rental system in South Korea in which tenants make a large lump-sum deposit that is fully returned at the end of the lease. Unsecured and other household loans, however, rose 500 billion won on-month, rebounding from a 700 billion-won decrease in February, driven mainly by growth in loans for stock investment following a market correction triggered by the Middle East conflict.
"Since the outbreak of the Middle East conflict, the stock market has shown sharp fluctuations. On days when stock prices fell significantly, loans increased markedly," BOK official Park Min-cheol told a press briefing. Corporate loans rose 7.8 trillion won from a month earlier in March, following a 9.6 trillion-won gain the previous month. Outstanding corporate loans stood at 1,387 trillion won as of end-March, the data showed.
Meanwhile, separate data released by the Financial Supervisory Service (FSS) showed that loans extended to households by all financial institutions, including savings banks and insurance firms, rose 3.5 trillion won from a month earlier in March, following a 2.9 trillion-won on-month rise the previous month. Mortgage loans increased 3 trillion won last month, decelerating from a 4.1 trillion-won increase in February, the FSS said.
"We expect household loans to grow at a slower pace for the time being. But uncertainties remain high in the property market, particularly in Seoul and surrounding areas, so it is still too early to determine whether stability in the housing market will be sustained," Park said.