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Household, corporate borrowing falls on tightening regulations

Published: 15 Jan. 2025, 17:01

A passerby walks by signs about banks' loan programs in Seoul on Dec. 1. [YONHAP]

Household loans extended by Korean banks fell for the first time in nine months in December, with corporate loans dropping by the largest margin in nine years amid global uncertainty and tightening loan regulations, data showed Wednesday.

Banks' outstanding household loans stood at 1,141 trillion won ($782.1 billion) as of end-December, down 400 billion won from a month earlier, according to the data from the Bank of Korea (BOK).

It was the first decline since March, when banks' household borrowing went down by 1.7 trillion won.

Household borrowing had since risen sharply, in line with surging housing prices in Seoul and some of its surrounding regions, to as high as 9.2 trillion won in August.

In response, financial authorities have pressed major lenders to implement tight lending rules to rein in surging household debt and rising home prices, leading to a steady decline in total loans.

Home-backed loans went up by 800 billion won from a month earlier in December, slowing from a 1.5 trillion won increase in November. Outstanding mortgages stood at 902.5 trillion won at end-December.

Unsecured and other types of loans extended by banks to households, however, fell 1.1 trillion won to 237.4 trillion won.

During the entire year of 2024, household borrowing jumped 46 trillion won, marking the largest growth in two years.

“Home transactions and housing prices have trended down in recent months, but uncertainties remain high given easing financial conditions,” BOK official Park Min-cheol said.

Corporate loans sank 11.5 trillion won from a month earlier to 1,315.1 trillion won in December, marking the sharpest fall since December 2016.

“Companies appeared to have postponed investment, while strengthening their financial soundness, amid heightened global external uncertainties,” the official said.

Meanwhile, household loans extended by all financial institutions rose 2 trillion won last month, slowing from the previous month's 5 trillion won advance, according to data from the Financial Supervisory Service.

In particular, household loans extended by nonbank financial institutions, such as brokerages and insurance firms, rose 2.3 trillion won, compared with a 3.2 trillion won gain in November.

Home-backed loans extended by all financial institutions increased 3.4 trillion won, also slowing from the 4 trillion won increase recorded the previous month.

Over the entire year, household loans added 41.6 trillion won, sharply accelerating from the previous year's 10.1 trillion-won rise, according to the data.

Yonhap