Household debt growth slows for the first time in seven quarters… The extent of the increase in the cost burden is rather wide

Household credit balance and rate of change compared to the same period last year. Provided by the Bank of Korea

During the third quarter of this year, household debt increased by 36.7 trillion won to about 1845 trillion won. While mortgage loans continued to grow at a high rate, household debt growth slowed for the first time in seven quarters as other loans, mainly credit loans, declined.

According to the ‘3rd quarter household credit (provisional)’ statistics released by the Bank of Korea on the 23rd, the balance of household credit as of the end of September stood at 1844.9 trillion won, up 36.7 trillion won. Household credit refers to ‘comprehensive household debt (debt)’ in which the amount of credit card used before payment (sales credit) is added to the loans received by households from banks, insurance companies, loan companies, and public financial institutions. As the size of the economy expands and asset prices such as real estate rise, household credit continues to increase, breaking records every quarter.

Household credit, which has risen sharply since the outbreak of COVID-19, seems to have stagnated in the third quarter of this year. Looking at the increase in household credit balances, it was 6.8 trillion won less than the 43.5 trillion won increase in the second quarter of this year. The rate of increase from the same period of the previous year was 9.7%, the first time in seven quarters that the rate of increase that had continued to rise since the fourth quarter of 2019 was broken. This is interpreted as the effect that banks are reducing the credit limit and managing household loans, and the sales credit also decreased by 200 billion won due to the decrease in consumption due to the fourth wave of Corona 19.

Looking at household loans, excluding sales credit (card price) among household credit, the balance as of the end of the third quarter was 1744.7 trillion won. This is an increase of 37 trillion won (2.2%) from the end of the second quarter. Among household loans, mortgage loans increased by 20.8 trillion won from the second quarter, more than the 17.3 trillion won increase in the second quarter. On the other hand, other loans, including credit loans, increased by 16.2 trillion won in the third quarter of this year, and the rate of increase decreased sharply from 23.8 trillion won in the second quarter. Song Jae-chang, head of the Bank of Korea’s financial statistics team, said, “Household loans at deposit banks increased mainly on mortgage loans, as housing sales and jeonse demand continued this year.” The fact that there was an increase also had an impact,” he explained.

In the third quarter, when looking at the increase in household loans by institution, it increased to 21.1 trillion won in deposit banks, 8.2 trillion won in non-bank deposit-taking institutions such as mutual savings banks and credit unions, and 7.7 trillion won in other financial institutions such as insurance companies. . Even at non-bank depository institutions, mortgage loans increased by 2.8 trillion won in the third quarter, up 1.2 trillion won from the 1.6 trillion won increase in the previous quarter. This is the largest increase in four years and three months since it recorded an increase of 3.2 trillion won in the second quarter of 2017.

At deposit banks, the increase in household loans increased in the third quarter from the second quarter, but decreased in non-bank depository institutions and other financial institutions. Team leader Song added, “In the case of other financial institutions, a decrease in the amount of policy mortgages was added to the decrease in the increase in other loans.”

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