Korea‘s bank household loans top $835bn for first time in February

[Graphics by Song Ji-yoon and Chang Iou-chung]

South Korea’s household loans extended by banks surpassed 1,100 trillion won ($835 billion) for the first time amid a surge in mortgage loans and growing competition to cut interest rates.

Total household loans across the entire financial sector, however, saw their first decline in 11 months.

According to the Bank of Korea on Wednesday, the outstanding balance of household loans in the banking sector, including policy mortgage loans, stood at 1,100.3 trillion won in February, up 2 trillion won from the previous month. Growth extended for the 11th straight month.

The increase comes as banks are engaged in a fierce competition to lower interest rates, leading households to turn to the lenders for loans.

Household loans in the entire financial sector, in the meantime, including those extended by banks and second-tier financial institutions, fell by 1.8 trillion won in February compared to the previous month, according to the Financial Services Commission and Financial Supervisory Service on Wednesday.

It is the first decline since March 2023 when the amount decreased by 6.5 trillion won.

Loans from second-tier financial institutions declined by 3.8 trillion won, a steeper fall compared to the previous month‘s decline of 2.5 trillion won.

This trend was attributed to financial consumers prioritizing the repayment of relatively high-interest loans from second-tier financial institutions with their Lunar New Year holiday bonuses, compounded by worsening conditions in the local real estate market.