Seoul: Household loans extended by South Korean banks experienced a decline for the first time in nine months in December, while corporate loans saw the largest drop in nine years. This downturn is attributed to global uncertainties and stricter loan regulations, as reported by data released Wednesday.
According to Yonhap News Agency, the Bank of Korea (BOK) data revealed that the total outstanding household loans stood at 1,141 trillion won (approximately US$782.1 billion) at the end of December. This marks a decrease of 400 billion won from the previous month, representing the first decline since March, when household borrowing decreased by 1.7 trillion won. The initial rise in household borrowing was driven by soaring housing prices in Seoul and surrounding areas, reaching a peak of 9.2 trillion won in August.
In an effort to curb the increasing household debt and rising home prices, financial authorities have urged major lenders to adopt stricter lending regulations. Consequently, the overall amount of loans has seen a steady decline. Home-backed loans increased by 800 billion won in December, a slowdown from the 1.5 trillion-won increase in November. By the end of December, outstanding mortgages stood at 902.5 trillion won. However, unsecured or other types of loans provided by banks to households decreased by 1.1 trillion won, totaling 237.4 trillion won.
For the entirety of 2024, household borrowing surged by 46 trillion won, marking the highest growth in two years. BOK official Park Min-cheol commented on the situation, stating, "Home transactions and housing prices have trended down in recent months, but uncertainties remain high given easing financial conditions."
Corporate loans experienced a significant drop of 11.5 trillion won from the previous month, totaling 1,315.1 trillion won in December. This represents the steepest fall since December 2016. The BOK official noted, "Companies appeared to have postponed investment, while strengthening their financial soundness, amid heightened global external uncertainties."
Meanwhile, household loans from all financial institutions increased by 2 trillion won last month, a deceleration from the previous month's 5 trillion-won rise, as reported by the Financial Supervisory Service. Notably, household loans from nonbank financial institutions, such as brokerages and insurance firms, rose by 2.3 trillion won, compared to a 3.2 trillion-won increase in November. Home-backed loans from all financial institutions rose by 3.4 trillion won, slowing from the previous month's 4 trillion-won increase. Over the year, household loans grew by 41.6 trillion won, a significant acceleration from the 10.1 trillion-won increase seen the previous year.