South Korea’s Bank Household Loan Growth Slows to Seven-Month Low
Household lending by South Korean banks rose by just 600 billion won in September, while lending across all financial institutions declined for the first time since December.
South Korean banks recorded their smallest monthly increase in household lending in seven months in September, as tighter borrowing rules and higher interest rates curbed credit growth.
Outstanding household loans at banks reached 1,198.9 trillion won, or about $895.5 billion, at the end of September, according to preliminary data from the Bank of Korea. The balance increased by 600 billion won from August, a sharp slowdown from the 3.5 trillion-won rise recorded a month earlier.
The September increase was the weakest since March, when bank household lending grew by 500 billion won. The figures point to a significant loss of momentum in borrowing after policymakers tightened lending restrictions and the central bank raised financing costs.
Mortgage lending continued to expand despite the broader slowdown. Outstanding bank mortgages rose by 2.9 trillion won from the previous month to 955.5 trillion won. That increase was largely offset by a contraction in other forms of household credit, which fell by 2.3 trillion won to 242.6 trillion won.
The contrasting trends show that housing-related borrowing remained the main source of household credit growth, while unsecured and other loans weakened. The overall monthly increase in bank lending was only about one-sixth of the amount recorded in August.
Borrowing conditions have become more restrictive after the Bank of Korea lifted its benchmark interest rate to 3 percent through consecutive increases in July and August. Those were the first back-to-back rate hikes since January 2023, when the central bank was completing a series of seven consecutive increases that began in April 2022.
A broader measure covering all financial institutions showed an outright decline. Household loans across the financial sector fell by 2.2 trillion won in September from the previous month, according to separate data from the Financial Services Commission. It was the first monthly decrease since December, when the total fell by 1.2 trillion won.
The latest figures suggest that higher rates and tighter regulations are affecting the household credit market, although the continued rise in mortgages indicates that housing finance remains resilient. Policymakers are likely to watch whether the September slowdown persists and whether mortgage growth eases further in the coming months.