Household loan growth slows down in November amid tight lending rules

Apartment buildings in Seoul, Dec. 7 / Yonhap

Household loans extended by Korean banks grew at a slower pace in November amid tightened lending regulations aimed at cooling the overheated property market in the capital region, central bank data showed Wednesday.

Banks' outstanding household loans stood at 1,175.6 trillion won ($799.62 billion) as of end-November, up 1.9 trillion won from a month earlier, according to the Bank of Korea (BOK).

The growth slowed from the 3.5 trillion-won increase tallied in the previous month.

Home-backed loans rose 700 billion won on-month to 935.5 trillion won, decelerating from a 2 trillion-won gain in October. It marked the slowest growth since March 2023.

Unsecured and other types of household loans climbed 1.2 trillion won to 239.2 trillion won in November, following a 1.4 trillion won gain a month earlier.

"Mortgage loans grew at a slower clip despite the increase in housing transactions prior to the Oct. 15 measures, as banks continued to tighten household lending and demand for jeonse loans declined," the BOK said in a released statement.

Under the tightened rules announced in mid-October, the government designated 21 more districts in Seoul as speculative zones, placing all 25 districts in the capital under stricter regulations. It also toughened lending limits, capping mortgage loans at as little as 200 million won.

Jeonse is a unique housing rental system in Korea in which tenants make a large lump-sum deposit that is fully returned at the end of the lease.

"Other household loans continued to increase markedly amid an expansion in both domestic and overseas stock investments," the BOK added.

The benchmark Korea Composite Stock Price Index (KOSPI) has surged nearly 70 percent so far this year, driven by the semiconductor market upcycle, optimism over the artificial intelligence (AI) boom and government-led market reform measures.

Separate data from the Financial Supervisory Service (FSS) showed household loans extended by all financial institutions rose 4.1 trillion won in November from a month earlier, slowing from the previous month's 4.9 trillion-won gain.

Home-backed loans extended by all financial institutions, including savings banks and insurance firms, rose 2.6 trillion won last month, compared with a 3.2 trillion-won increase in October.

Other types of loans extended to households gained 1.6 trillion won, compared with the previous month's 1.7 trillion-won increase.

"Overall, the pace of home price increases in the greater Seoul area has been moderating. In some key districts of Seoul, however, the slowdown has been more gradual, so continued monitoring is necessary," BOK official Park Min-cheol told a press briefing.

"Apartment transactions in Seoul have dropped sharply, but the decline has been limited in Gyeonggi and Incheon, partly due to a ballooning effect. The upward pressure on housing-related loans also remains in place," he added.

The data also showed that corporate loans increased 6.2 trillion won on-month in November, up from a 5.9 trillion-won rise the previous month.

Outstanding corporate loans stood at 1,372.2 trillion won at the end of November, the BOK said.