Household loans across the entire financial sector rose 6.2 trillion won last month, with the pace of increase slowing for a second straight month. Financial authorities said household loan growth remains above past averages and housing transactions in the Seoul metropolitan area are rising, and they decided to maintain their management stance.

The Financial Services Commission said on Thursday that July household loans across the entire financial sector rose 6.2 trillion won from the previous month. The increase slowed after 9.3 trillion won in May and 8.3 trillion won in June, but it was larger than 2.2 trillion won in the same month last year.

Mortgage loans rose 3.5 trillion won, with the pace slowing by 1.0 trillion won from 4.5 trillion won the previous month. The increase in bank mortgages slowed to 3.4 trillion won from 4.3 trillion won, while the rise in non-bank financial institutions eased to 100.0 billion won from 300.0 billion won. Other loans rose 2.7 trillion won, with the pace slowing from 3.8 trillion won a month earlier. Within that, credit loans rose 2.0 trillion won, down from 2.6 trillion won.

By sector, household loans at banks rose 5.4 trillion won, with the pace slowing from 7.6 trillion won the previous month. The increase in banks’ own mortgage lending slowed to 2.5 trillion won from 2.9 trillion won, while policy loans eased to 900.0 billion won from 1.4 trillion won. The increase in other loans also slowed to 2.0 trillion won from 3.3 trillion won.

Household loans at non-bank financial institutions rose 800.0 billion won, unchanged from the previous month. Mutual finance shifted to a 700.0 billion won decrease from a 200.0 billion won increase the previous month. Savings banks turned to a 500.0 billion won increase from a 200.0 billion won decrease, and credit-specialised financial companies switched to a 300.0 billion won increase from a 200.0 billion won decrease. The increase in insurance sector lending slowed to 700.0 billion won from 1.1 trillion won.

Lee Eok-won says household debt still high

Financial authorities judged that they are not in a position to lower the intensity of household debt management, even though the pace of increase has slowed. Lee Eok-won (이억원), chairman of the Financial Services Commission, assessed at an expanded household debt review meeting at the Korea Federation of Banks that the July increase in household loans fell to 6.2 trillion won from the previous month but remains above past averages, and that the pace of exhausting the annual aggregate management target limit is also fast.

The average monthly increase in household loans over the past 5 years was tallied at 2.4 trillion won, while the 5-year average for July was 3.6 trillion won. The July increase of 6.2 trillion won is 2.6 trillion won higher than the 5-year July average. Apartment sales transaction volume in the Seoul metropolitan area also rose to 30,000 units in June this year from 21,000 units in December last year.

Still, in line with the comprehensive financial measures for real estate market stability announced the previous day, authorities will expand the capacity to supply funding for end-users. Financial authorities plan to readjust the aggregate household loan management target and recalculate total targets by financial company so that funding for end-user purposes, such as relocation costs, interim payments and balance loans, can be supplied in a timely manner.

Lee said, "As the aggregate household loan target has been reasonably adjusted, please make every effort so that funds for end-user needs, such as relocation costs, interim payments and balance loans, can be supplied in a timely and stable manner using the expanded capacity for additional funding supply across the financial sector."

He also stressed, "As the target adjustment is a measure to support end-user demand, it must not become a signal that stimulates speculative loan demand."

The Financial Supervisory Service plans to quickly proceed with consultations with the financial sector to adjust total targets by financial company and push follow-up procedures such as revising relevant implementation rules.

The Financial Services Commission plans to implement within this month measures that can be put into effect immediately, such as expanding guarantee supply for PF project operators and improving the method for calculating the loan-to-value ratio for relocation loans.