Credit loans in South Korea surged by another 1 trillion won ($844.4 million) in less than 10 days this month as individual investors continue to flood real estate and stock markets on the liquidity-driven rally.
As of Sept. 10, credit loan balance totaled 125.4 trillion won, up 1.14 trillion won in just eight business days, according to the country’s five major lenders including Shinhan, KB Kookmin, Hana, Woori and NH NongHyup on Sunday.
At the current rate, credit loan gains this month are likely to exceed last month’s record high of 4.08 trillion won.
The ultra-low interest rates are partly to blame. As of Sept. 10, credit loan rates in the five banks ranged from 1.85 percent to 3.75 percent. This is slightly higher than a month ago when they stood at 1.74-3.76 percent, but still lower than the 2-4 percent mortgage loan rates.
Rock-bottom rates are fueling demand in stock and real estate markets, pushing up asset prices.
The latest initial public offering of Kakao Games Corp. drew record retail orders of more than $50 billion. Credit loan balance jumped 1.8 trillion won on Sept. 1 alone, the company’s first day of subscription, according to the five major banks.
Some are tapping credit to buy real estate as access to other financing has been cut off from the toughened lending rules aimed to cool the overheated housing market.
Loans taken out by self-employed businesses and other struggling households amid the ongoing pandemic have also increased.
To fend off a potential credit crisis, the government will monitor the debt service ratio of financial institutions and look into the heated competition among banks in the credit loan market. New loan regulations could also be introduced, though a more targeted approach would be needed to avoid hurting low-income households, officials said.
The government said it plans to release a comprehensive plan to manage household debt in the coming weeks.
By Choi Seung-jin and Kim Hyo-jin
[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]