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Rising interest rates and regulation Decrease in household loans by 200 billion won

Last month, it was reported that the balance of household loans at banks decreased for the first time in seven months. The effect is interpreted as the combination of the Bank of Korea’s rate hike and the financial authorities’ regulation on the total amount of household loans.

According to the ‘Financial Market Trends in December 2021’ announced by the Bank of Korea on the 13th, as of the end of last month, the balance of household loans by banks was 1060.7 trillion won, down 200 billion won from the end of the previous month.

It is the first time since January 2004 when the Bank of Korea published breaking statistics on the decrease in household loans by banks in December. Also, the decrease in household loan balance was the first in seven months since May last year.

Household loan growth has also been lagging behind for the third consecutive month. Bank household loans increased by 6.1 trillion won in August, 6.4 trillion won in September, 5.2 trillion won in October and 2.9 trillion won in November. The increase gradually decreased from August, and finally turned to a decline of 200 billion won in December.

Park Seong-jin, Deputy Head of Market Team at the Bank of Korea’s Financial Markets Bureau, explained, “The decrease in the balance of household loans at banks in December was the effect of the government and financial authorities managing the growth rate of household loans.”

However, he emphasized that “we have to watch the trend a bit more before judging that the growth of household loans is slowing as banks resume household loans this year,” he said.

From January to December last year, total household loans by banks increased by 71.8 trillion won, the third largest increase in history.

The rate of increase in household loans by banks so far reached an all-time high of 10.6 trillion won in 2020, and increased by 78.2 trillion won in 2015, the second largest increase in history.

The total amount of household loans recorded negative last month, but mortgage loans increased by 2 trillion won from the previous month.

The balance of main loans (including transfer of policy mortgage loans) recorded 778.8 trillion won, but the increase slightly decreased considering that the increase was 2.4 trillion won in November. In addition, this increase is the lowest since February 2018, when 1.8 trillion won.

The BOK explained that although the demand for jeonse-related funds continued, the increase in banks’ main loans slightly decreased due to the slowdown in housing sales transactions and a decrease in the handling of group loans.

The balance of other loans such as credit loans and negative bankbooks stood at 280.7 trillion won at the end of last month, down 2.2 trillion won from the end of the previous month. It is the largest decline since the BOK began preparing the related statistics as of December.

It is interpreted as a result of a combination of year-end bonuses, higher loan interest rates, and restrictions on bank credit limits.

As of the end of December, the company’s balance of loans in KRW stood at 1065.7 trillion won, down 2.8 trillion won from November.

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