South Korea: Household Consumer Loans Increase Again



Korean commercial banks are seeing an increase in household consumer loans, as the basic interest rate shows signs of decreasing.

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Korean commercial banks are seeing an increase in household consumer loans, as the basic interest rate shows signs of decreasing. The four major commercial banks in Korea, KB Kookmin Bank, Shinhan Bank, Hana Bank and Woori Bank, granted new household loans worth 5.1519 trillion won ($3.4 billion) on May 14. In May 2022, 9.662 trillion won was lent, but this year, more than half of this amount (53.3%) has been lent in just about 10 days.

Residential mortgage loans including jeonse loans (a popular form of rental in Korea where tenants make a large deposit and do not have to pay monthly rent) and credit loans have seen increases in lending. According to experts, the trend of increasing household borrowing will continue this year.

South Korea: Household Consumer Loans Increase Again ph: [email protected]

Five major banks, including NH Nonghyup Bank, issued new household loans worth 18.4 trillion won in March alone, an increase of 85.6% from the 9.9172 trillion won figure of the same period last year. The figure for April was 15.371 trillion won, an increase of 69.5%. Among them, mortgage loans increased 92.9% in March and 75.6% in April. Credit lending in March and April also increased by about 30% from a year ago.

As market interest rates are falling, household loans, which tended to decline last year, are picking up again this year. The basic interest rates of 4 large commercial banks for residential mortgage loans including KB Kookmin, Shinhan, Hana and Woori were at 3.68-5.48%/year, much lower than at 4.62-6.875% at the end of last year. Interest rates for credit loans have dropped to 4.65-6.15%/year. Commercial banks have also actively lowered additional interest rates within the self-adjusting limit.

However, as household loans rose again, many financial experts expressed concern about the status quo. Korea's household debt-to-GDP ratio rose to 105.1% in the fourth quarter of 2022, the level likely to cause a recession, according to Kwon Do-geun, head of monetary credit research at the Bank of Korea. When this number exceeds 80%, economic growth slows and the risk of recession increases.

South Korea: Household Consumer Loans Increase Again

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