The Korea Herald


Household loans up for 1st time in 8 months on increased policy financing

By Yonhap

Published : May 25, 2023 - 20:55

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Myeong-dong in Seoul. (Yonhap) Myeong-dong in Seoul. (Yonhap)

Household loans increased for the first time in eight months in April due to an increase in home mortgage loans issued by policy financing, data showed Thursday.

Household loans climbed 200 billion won ($150.6 million) in April from a month earlier largely due to a 4.7 trillion-won increase in mortgage loans provided by state-run housing firms, according to the Financial Supervisory Service.

But the household loans from banks and non-banking financial companies continued to show a downward trend that started this year.

The FSS said household loans are unlikely to show a sharp increase in the coming months due to high interest rates and a weaker housing market.

Financial institutions are also expected to refrain from increasing the supply of loans due to higher credit risks for banks and risks of a decrease in profitability and integrity for non-banking financial firms.

The FSS, however, said it will continue to manage the household loan situation as South Korea has the highest household debt-to-gross domestic product ratio among 36 major economies worldwide, standing at 102.2 percent as of the first half of last year, citing a report from the Institute of International Finance.

On the upward trend of the delinquency ratio of the financial sector, the FSS said it is expected it to continue but not to threaten the soundness of the country's financial system.

The delinquency rate has increased this year due to rate hikes, an economic slowdown and a slump in the real estate market, but remains at a similar level to the pre-pandemic period and at a moderate level compared with the 2008 global financial crisis, according to the FSS.

Meanwhile, some experts advised financial regulators to strengthen monitoring of corporate loans in the second half of this year amid concerns over a change in trade circumstances and a possible economic recession. (Yonhap)