The growth in household loans significantly eased in the first half from a year ago under stricter loan regulation and sluggish housing market.
According to data released by Financial Services Commission, Financial Supervisory Service, and Bank of Korea on Thursday, household loans from financial institutions stretched 5.2 trillion won ($4.4 billion) in June, off 1 trillion won from the gains in the same period a year earlier and 700 billion won in the previous month. The eased headline number largely owes to slowdown in growth in loans backed by mortgages (from 2.9 trillion won to 2.6 trillion won) and credit and overdraft (from 3.4 trillion won to 2.6 trillion won).
For the first six months of this year, household loans increased 18.1 trillion won, halving from the addition of 33.6 trillion won in the same period last year and significantly slowed from the surges of 50.4 trillion won in the first half of 2016 and 40.2 trillion won in the following year.
Bank loans in June increased amid new housing supplies.
Household loans extended by the banking sector added 5.4 trillion won in June, 400 billion won more than the increases a year ago and a month ago. The addition was biggest since the same gain in December.
Mortgage-backed loans increased 3.9 trillion won in June, 700 billion won greater than the gain in the same period a year earlier and 1 trillion won more than a month ago. The increase came on the jump in collective loans as families moved into new apartments in the capital area.
The BOK said that growth in mortgage-backed loans extended in June comes as demand grew for loans to pay out balances to move into new apartments as well as steady rise in demand for loans for jeonse, or long-term rents.
The FSC also explained that 700 billion won worth government subsidy for housing deposits offered by Korea Housing & Urban Guarantee Corporation has started to be counted as household loans extended by banks from this year. When excluding the amount, the growth in household loans in June would remain similar to last year, it said.
Other loans extended by the banking sector, meanwhile, increased 1.5 trillion won in June, 300 billion won slower from a year ago and 600 billion won from a month ago.
The balance in household loans by the non-banking sector decreased 200 billion won in June, down 1.4 trillion won from a year earlier and 1.1 trillion won from last month.
Mortgage-backed loans fell 1.3 trillion won in June, down 900 billion won on-year and 200 billion won on-month.
Other loans, meanwhile, increased 1.1 trillion won in June, down 400 billion won from a year earlier and 800 billion won from a month ago.
Growth in mortgage-backed loans extended by both the banking and non-banking sectors narrowed 200 billion won in June. The drop widens to 900 billion won when reflecting government-backed loans.
Industry insiders noted that Korea’s overall real estate industry remains stagnant amid tightened loan regulations involving loan-to-value and debt-to-income ratios as well as debt service ratio (DSR).
Under DSR, financial institutions reflect an index that divides principal payments of credit-based loans, in addition to mortgage loans, by income when coming up with the amount of loans that can be extended to borrowers. DSR, which was applied to the banking sector in October, last year, is now applicable in the non-banking sector as well. Tightened regulations have reduced growth in other loans by 800 billion won.
By Lee Sae-ha and Lee Eun-joo
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