Seoul: The financial regulator announced on Monday that the growth in household loans remains manageable, even though there was a noticeable spike last month due to the spring moving season and an increase in home prices in certain areas of Seoul.
According to Yonhap News Agency, household loans extended by all financial institutions increased by 4.3 trillion won from the previous month, reaching a total of 1,667 trillion won. This marked a shift from the on-month decline observed in the preceding month. Specifically, household loans issued by banks experienced growth for the first time in three months during February.
The Financial Services Commission (FSC) commented, "Household loan growth accelerated in February, but it is still within manageable levels." However, recent trends indicate that home prices are gaining momentum, influenced by monetary easing, banks relaxing some lending rules, and the government lifting certain land transaction permission zones in Seoul.
Last week, the Bank of Korea issued a warning that these conditions could heighten expectations of further increases in housing prices, potentially leading to a rise in household debts. Industry data revealed that housing prices in three districts in southern Seoul, where restrictions were removed, increased by 0.2 percent in the second week of March, marking the sharpest weekly rise since August.
The financial regulator emphasized its ongoing vigilance against rising home prices and the subsequent increase in household loans. It also indicated that it would take preemptive measures to curb any further rise in household loans. The FSC reiterated its plan to implement tighter debt-service-ratio (DSR) rules in September, with specific details to be finalized by May.
The FSC has introduced the stress DSR ratio, which assesses how much borrowers need to pay for principal and interest in relation to their yearly income, acting as a ceiling on aggregate lending.