Household borrowing logs sharpest gain in 8 months in S. Korea in May

Seoul, June 11 Household loans extended by South Korean banks rose sharply in May, central bank data showed on Wednesday, driven by an increase in housing transactions.

Banks' outstanding household loans stood at 1,155.3 trillion won (US$845.07 billion) as of end-May, up 5.2 trillion won from a month earlier, according to the data from the Bank of Korea (BOK).

The reading marks the largest on-month gain since September 2024, when household loans rose by 5.6 trillion won, as well as the fourth consecutive monthly increase.

Home-backed loans rose by 4.2 trillion won from the previous month, reaching 918.0 trillion won as of end-May. The growth marked an acceleration from a 3.7 trillion-won increase logged in April.

Unsecured and other types of household loans climbed 1 trillion won to 236.3 trillion won, the data showed.

"The impact of the recent increase in home transactions on loan growth has materialized," BOK official Park Min-cheol said in a press briefing.

"As we are now in a monetary easing cycle, we are closely monitoring the situation with caution to ensure that the increased liquidity does not fuel expectations of rising housing prices or further stimulate the growth of household debt," he added.

Home transactions rose markedly following the loosening of regulations on household lending by banks earlier this year and the Seoul city government's partial lifting of its land transaction permission rules.

Apartment transactions nationwide jumped from 26,000 in January to 39,000 in February and further to 50,000 cases in March. In April, the figure came to 41,000.

In Seoul, the number of apartment contracts rose from 3,300 in January to 6,200 in February and further to 9,500 in March, before falling to 5,000 cases in April.

In the wake of surging real estate prices, the Seoul municipal government reinstated the land permission regulation in March. The scheme requires prior approval from local authorities for transactions of apartments located in certain parts of the city's wealthy districts.

Corporate loans also increased in May, driven by expanded lending operations by major banks and rising demand for operating funds by some large corporations.

Loans to companies grew 8 trillion won from a month earlier in May, following a 14.4 trillion-won on-month increase in April.

Outstanding corporate loans stood at 1,346.6 trillion won as of end-May, according to the data.

Separate data from the Financial Supervisory Service (FSS) showed household loans extended by all financial institutions rose 6 trillion won in May from a month earlier, accelerating from the previous month's 5.3 trillion-won gain.

Home-backed loans extended by all financial institutions, including savings banks and insurance firms, went up 5.6 trillion won last month, also accelerating from the 4.8 trillion-won increase in April.

Other types of loans extended to households rose by 0.4 trillion won last month, compared with the previous month's 0.5 trillion-won decline, the data showed.

The Financial Services Commission (FSC) said it will beef up the monitoring of home-backed loans extended in the metropolitan area.

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