Mortgage Arrears in South Korea More Than Double in Three and a Half Years

Delinquent housing-backed loans at South Korean banks have grown 2.2-fold in three and a half years, far outpacing the growth of mortgage lending itself.

Data submitted by the Financial Supervisory Service to the office of Park Seong-hoon, a People Power Party member of the National Assembly’s Political Affairs Committee, showed that domestic banks’ mortgage loan balances rose from 644.3 trillion won at the end of 2022 to 779.2 trillion won at the end of June. That represented a 21% increase.

Over the same period, loans with principal or interest overdue by at least one month climbed from 1 trillion won to 2.2 trillion won, a 120% increase. The balance rose each year, reaching 1.6 trillion won at the end of 2023, 1.9 trillion won at the end of 2024 and 2.1 trillion won at the end of last year.

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The fact that mortgage loans themselves grew by 20% over four years while delinquent loans more than doubled is a warning signal that households’ debt repayment capacity has failed to keep pace with the growth of lending.

Long-term arrears also increased. Loans overdue for at least three months rose from 500 billion won at the end of 2022 to 1.4 trillion won at the end of last year, remaining at that level in June. Banks increased provisions for mortgage loan losses from 300 billion won to 900 billion won, while substandard and below loans more than doubled from 800 billion won to 1.7 trillion won.

NH NongHyup Bank had the largest mortgage arrears balance in June, at 511.73 billion won, followed by KB Kookmin Bank at 368.02 billion won, Woori Bank at 341.96 billion won, Hana Bank at 302.66 billion won and Shinhan Bank at 216.88 billion won. Jeonbuk Bank recorded the banking sector’s highest mortgage delinquency rate, rising fivefold from 0.19% at the end of last year to 0.95% in June. Park said the figures showed that household repayment capacity was not keeping pace with loan growth and called for early checks on vulnerable borrowers and risks tied to group loans.

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Financial authorities should proactively examine vulnerable borrowers and the risk of defaults in group loans.