Banks’ Mortgage Overdue Loans Surge 2.2-Fold to 2.2 Trillion Won in Three and a Half Years

South Korean banks’ overdue mortgage loans have more than doubled in three and a half years, reaching 2.2 trillion won at the end of June. The increase has come as rising home prices pushed up borrowing and high interest rates made repayment more difficult for households.

Data submitted by the Financial Supervisory Service to Rep. Park Seong-hun showed that domestic banks’ mortgage loan claims grew from 644.3 trillion won at the end of 2022 to 779.2 trillion won at the end of June, a 21% increase. Loans with principal or interest overdue by at least one month rose from 1 trillion won, or 0.11% of the total, to 2.2 trillion won, or 0.28%.

Loans overdue for at least three months increased from 500 billion won to 1.4 trillion won during the same period. Nonperforming mortgage loans classified as fixed, doubtful or estimated losses more than doubled, from 800 billion won to 1.7 trillion won.

NH NongHyup Bank had the largest overdue balance at 511.7 billion won, followed by KB Kookmin Bank with 368 billion won, Woori Bank with 341.9 billion won, Hana Bank with 302.6 billion won and Shinhan Bank with 216.8 billion won. NongHyup’s balance was 3.8 times higher than at the end of 2022. Jeonbuk Bank reported the highest overdue ratio, at 0.95%, after large delinquencies emerged in some newly built housing group loans, the Financial Supervisory Service said. Park called the widening gap between loan growth and overdue debt a warning sign for household repayment capacity.

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The fact that mortgage loans grew by 20% over the past four years while overdue loans increased by more than twice that amount is a warning sign that households’ repayment capacity has not kept pace with the growth in lending.