South Korea May Ease Credit Loan Limits as Growth Slows

The growth of personal loans, including credit lines and overdrafts, at South Korean banks is gradually slowing down in the latter half of the year. This follows a significant surge in the first half, largely fueled by demand for investment purposes amid a booming stock market.

According to financial sector data, the outstanding balance of household loans across the five major commercial banks (KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup) reached approximately 779.9 trillion won as of August 13. This represents an increase of 916.1 billion won since the end of July. While this marks an increase, it is a notable slowdown compared to the monthly growth of over 4 trillion won recorded in June and July.

Mortgage lending also saw an increase of 917.2 billion won in the same period, reaching 618.9 trillion won. However, the growth in credit loans, which had previously surged, has significantly decelerated. As of August 13, the outstanding balance for credit loans stood at 109.8 trillion won, with a modest increase of 13.1 billion won since the end of July. This contrasts sharply with the over 1 trillion won increase seen in July and even larger increases in May and June.

Financial authorities are scheduled to hold a working-level meeting with financial institutions on August 19 to discuss adjustments to the total loan management targets for each financial company. This meeting follows the government's announcement of real estate financial measures on August 13. Discussions are expected to cover the specifics of supplying new loans, estimated at 30 trillion won, with a focus on prioritizing genuine homebuyers for mortgage lending. While mortgage lending is expected to remain the priority, there is a growing expectation that restrictions on credit loans may also be gradually eased following detailed coordination, given the recent slowdown in their growth.

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As the authorities have adjusted the level of household loan total amount management, the overall supply capacity will be expanded. It is expected to be concentrated on actual homebuyers, but as the growth of credit loans has also slowed down recently, limits and restrictions may be gradually eased after detailed coordination.