Household loans extended by South Korean financial institutions shrank at the sharpest pace in one year in March amid slower growth in mortgage loans.

According to data from the Financial Services Commission and the Financial Supervisory Service on Thursday, the country’s outstanding household loans dropped by 4.9 trillion won in March from the previous month.

The decline was driven by slower growth in mortgage loans. The recent introduction of stressed debt service ratio (DSR) has restricted borrowers’ capacity to borrow money.

Despite a modest increase of 50 billion won in mortgage loans, the growth rate as of March plummeted from 3.7 trillion won in the previous month.

Other types of loans, such as credit loans, continued to decline across both banking and non-banking sectors.

In the non-banking sector, which consists of insurers and savings banks, household loans decreased by 3.3 trillion won in March The banking sector saw a drop of 1.6 trillion won in household debt.

“Higher interest rates and sluggish recovery in housing transactions have led to the recent reduction in household debt,” said a financial authority official.

By Park Na-eun and Han Yubin

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