SEOUL, Jan. 12 (Korea Bizwire) — Household loans extended by banks in South Korea declined for the first time in 18 years last year, due mainly to higher borrowing costs, the central bank’s data showed Thursday.
Banks’ outstanding household loans decreased by 2.6 trillion won (US$2.09 billion) to 1,058.1 trillion won, according to the data from the Bank of Korea (BOK).
This marked the first yearly decline since 2004, when the BOK began compiling such data.
In December alone, banks’ household loans increased 0.3 trillion won from a month ago.
The decline in bank loans is largely attributed to soaring interest rates in line with the BOK’s aggressive rate hikes to tamp down inflation.
The government’s efforts to curb household loans also helped cut the household debt, the BOK said.
The BOK has hiked its benchmark policy rate by a combined 2.75 percentage points since August 2021 to the current 3.25 percent to tame the fast-growing inflation.
In 2022, banks’ home-backed loans grew 20 trillion won to 798.8 trillion won, BOK’s data showed.
But unsecured and other types of loans extended to households shrank 22.8 trillion won to 257.9 trillion won, according to the data.
Banks’ corporate lending rose 104.6 trillion won to 1,170.3 trillion won last year as businesses resorted more to bank loans than selling debts.