The file photo taken Sept. 22, 2024, shows a sign on the exterior of a bank in Seoul with information about the bank’s home equity loan program. (Image courtesy of Yonhap)
SEOUL, May 20 (Korea Bizwire) — South Korea’s household credit reached a record high in the first quarter, though its growth slowed due to lending regulations and a decline in credit loans, central bank data showed Tuesday.
Outstanding household credit had stood at 1,928.7 trillion won (US$1.39 trillion) as of end-March, up 2.8 trillion won from three months earlier, according to the preliminary data from the Bank of Korea (BOK).
The reading marked the largest since the BOK began compiling relevant data in 2002.
It also logged the fourth consecutive quarterly increase, though the growth slowed sharply from a 11.6 trillion-won rise in the fourth quarter of 2024.
Household credit refers to credit purchases and loans given to households by financial institutions.
Of the total, household loans stood at a record high of 1,810.3 trillion won at the end of March, up 4.7 trillion won from three months earlier, as mortgage lending increased by 9.7 trillion won.
But credit purchases fell by 1.9 trillion won on-quarter to 118.5 trillion won, marking the first quarterly decline since the first quarter of 2024.
“The slowdown in home transactions at the beginning of the year led to slower growth in mortgage loans,” BOK official Kim Min-soo said at a press briefing.
“Household credit is expected to rise in the second quarter, given the increase in housing transactions since February due to the government’s land transaction permission scheme. Given the current policy stance, however, household loan growth is expected to slow going forward,” he added.
In February, the Seoul municipal government eased the scheme, which requires prior approval from local authorities for any apartment transactions, in parts of the city’s wealthy districts. But it was reinstated just a month later in the wake of a sharp rise in real estate prices in those areas.
The government has also moved to tighten lending regulations, with a stricter version of the stressed debt service coverage ratio (DSR), set to take effect in July.
The stressed DSR measures how much a borrower must pay in principal and interest relative to their annual income, acting as a ceiling on aggregate lending.
“We will continue to closely monitor the household credit situation, as interest rates are forecast to be lowered,” Kim said.
(Yonhap)
