South Korea’s household loans rise again for first time in four months

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South Korea’s real estate market, which had been experiencing a steep decline, is showing signs of recovery in some regions, as household loans from banks increased last month after four months of decline, suggesting that people are shifting their focus to investing from saving.

According to the Bank of Korea on Thursday, household loans at banks last month amounted to 1,052.3 trillion won ($790 billion), up by 2.3 trillion won from the previous month. This marks the first increase in household loans since December last year.

The central bank said this indicates that the funds that had been concentrated in banks in pursuit of high interest rates are gradually flowing into the real estate and stock markets.

Due to the aftermath of the central bank’s rapid tightening last year and the resulting stagnation in the real estate market, deleveraging of household loans remained strong until recently. Last year, household loans in the entire financial market decreased for the first time since data compilation began, and household loans from banks contracted for three consecutive months until March.

However, as financial authorities recommended that local lenders refrain from raising interest rates and the real estate market became more active due to regulatory easing, household loans began to rise again.

In the past, the government implemented various measures such as stricter mortgage lending rules and taxes on multiple homeowners to cool the heated housing market, while curbing property speculation and reducing household debt. However, the measures were criticized for causing a slump in the construction industry.

Of the household loans, home mortgage loans, including jeonse loans, increased by 2.8 trillion won from the previous month to 803.6 trillion won. Jeonse loans fell by 1.7 trillion won, continuing a decline for six consecutive months, but the falling pace slowed from 2.3 trillion won in the previous month.

Bank deposits in April contracted by 13.4 trillion won, a significant fall compared to a decline of 2 trillion won in the previous month.