[Digital Today reporter Ji-young Lee] Household loans across the financial sector rose by more than 9 trillion won last month, with the pace of increase accelerating sharply. Growth in mortgage loans slowed from the previous month, but other loans, including credit loans, returned to an upward trend and pushed up the overall increase in household lending. Financial authorities will hold weekly inspection meetings for financial companies that failed to meet management targets, and banks plan voluntary measures such as reducing credit loan limits for high earners.

The Financial Services Commission said on Wednesday it held a "household debt review meeting" at the Government Complex Seoul chaired by Deputy Secretary-General Jin-chang Shin (신진창) to discuss May household loan trends and responses.

According to the FSC, household loans across the financial sector increased by 9.3 trillion won in May. The rise exceeded both the 3.5 trillion won increase in the previous month and the 5.9 trillion won increase in the same month a year earlier.

By category, mortgage loans increased by 4 trillion won. The increase was smaller than the 5.5 trillion won rise in the previous month. Bank mortgage loans accelerated to a 3.2 trillion won increase in May from 2.7 trillion won in April, while non-bank mortgage loans shrank to 800 billion won from 2.8 trillion won over the same period.

Other loans increased by 5.3 trillion won, switching to an increase from a 2 trillion won decline in the previous month. Credit loans in particular swung to a 3.4 trillion won increase in May from a 900 billion won decline in April, which had a large impact.

By sector, household loans at banks rose 6.9 trillion won, expanding from a 2.1 trillion won increase in the previous month. Banks' own mortgage lending accelerated to a 2.1 trillion won increase from 1.4 trillion won, and other loans turned to a 3.7 trillion won increase from a 600 billion won decline.

Household loans at non-bank financial institutions also rose 2.3 trillion won. The increase in mutual finance slowed to 700 billion won from 2.1 trillion won, but insurance firms, specialised credit finance companies and savings banks switched to an increase.

At the meeting, Shin said May mortgage lending declined from the previous month despite a recent rise in home transactions and expanded execution of previously approved group loans such as interim payments. He said the increase in other loans widened sharply, centred on credit lines, due to funding demand during Family Month and the influence of the stock market.

Financial authorities are watching for the possibility that volatility in mortgage loans and credit loans could rise again. They believe mortgage lending could expand again as listings that emerged after the end of a suspension of heavier capital gains taxes on multi-homeowners are absorbed by the market.

Banks plan to pursue voluntary measures such as reducing new credit loan limits for high earners and encouraging repayment by waiving early repayment fees on credit loans. Individual banks plan to draw up detailed implementation measures, taking into account their own management targets and management strategies.

Cases of violations of additional household loan covenants were also reviewed. A total of 1,174 cases of additional covenant violations were detected in the banking sector in the first quarter. By type, there were 56 violations of covenants to dispose of an existing home, 1,106 violations of covenants prohibiting the purchase of an additional home, and 12 violations of move-in covenants.

If an additional covenant violation is detected, loan recovery measures are taken in accordance with the covenant. The violation is registered with the Korea Credit Information Services, restricting housing-related loans across the financial sector for the next 3 years.

Shin said this is the time for related agencies and the entire financial sector to make every effort to thoroughly manage household debt. He said an emergency management system will be activated by holding weekly inspection meetings for financial companies that do not meet management targets, focusing on checking the implementation status of management plans until the rising trend in household debt stabilises.

He added the government is maintaining a consistent and firm stance without wavering on household debt management. He said additional measures that have been prepared will be implemented boldly at an appropriate time, taking into account market conditions.