Dual Loans Hit Record High in Taiwan as Funds Flow to Stock Market

A growing number of Taiwanese individuals are taking on both a mortgage and a personal loan, a trend that reached a new peak in April with 423,000 people, or nearly 19% of all mortgage holders, engaging in this practice. This "dual-loan" phenomenon is closely tied to the recent surge in the stock market, as people leverage property equity and credit to fuel their investments.

Experts suggest that the appeal of dual loans lies in the relatively favorable interest rates and longer repayment terms offered for mortgage top-ups or personal revolving credit lines compared to other forms of borrowing. Traditionally, individuals might have used such funds for further real estate investment during property booms. However, the current trend shows a significant shift, with many now channeling these borrowed funds directly into the stock market, capitalizing on rising asset values.

This escalating debt accumulation has caught the attention of financial regulators. Reports indicate that some banks have begun to impose stricter lending criteria or increase interest rates on these types of loans in response to the rapid increase in borrowing amounts. The central bank has also noted this shift in loan structures, particularly the substantial growth in personal revolving credit, in its recent monetary policy meetings.

Despite the concerns, some analysts argue that the risk associated with dual loans is not uniform. The key factor, they emphasize, is the intended use of the funds. Borrowing for financial asset investment, especially if it doesn't involve further leverage, might have a limited impact. However, using personal loans for consumption, which depletes funds and leaves only debt, poses a more significant financial risk.

Looking at the long-term trend, the number of dual-loan holders has significantly increased over the past decade. In the same period ten years ago, there were only 284,000 such individuals, making up about 14% of mortgage holders. The current figures show not only a substantial rise in numbers but also an increase in their proportion among all mortgage borrowers, highlighting a persistent shift in household financial strategies.