Household debt increased 9.5 trillion won in July

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Household debt increased 9.5 trillion won in July


Korea’s household debt levels continued to climb in July despite the new administration’s efforts to rein in mortgage loans through stricter lending criteria.

Loans increased by 9.5 trillion won ($8.3 billion) in July, according to the Financial Services Commission and Financial Supervisory Service.

Of the 9.5 trillion won, the banking sector saw loans surge 6.7 trillion won in July while other financial institutions including savings banks, insurance and credit unions registered 2.8 billion won. In the consumer finance sector, different credit unions took up the highest portion at 1.3 trillion won as people turned towards the institutions for mortgage loans.

The financial authorities attributed the growth to the surging loan demand at Kakao Bank, the country’s second internet-only bank that opened July 27.

The report noted that Kakao Bank issued 400 billion won worth of loans in its first three days of operation.

The internet-only bank lent the largest amount of new loans in the first two weeks of this month thanks to lower interest rates and its easier digital procedures.

According to the Financial Supervisory Service on Wednesday, 540 billion won in new loans were borrowed from Kakao Bank in the first eleven days of the month.

Kakao Bank’s loans exceeded those from Korea’s 19 other banks and accounted for one quarter of the 2.17 trillion won that was borrowed during the period.

Still, the latest figure was a disappointment to the regulators that announced tougher real estate regulations and tightened lending requirement for those in some parts of the country, back in June.

The measure came into effect in July when the lending threshold for households in government-designated speculative areas was lowered to 40 percent of the property’s value, from 50 percent.

Alongside the loan-to-value ratio, the debt-to-income ratio was also reduced to 40 percent from 50 percent.

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