Banks’ household loans keep falling in March amid high borrowing costs

April 10, 2023
Household loans extended by banks in South Korea shrank for the third straight month in March amid high borrowing costs caused by the central bank’s monetary tightening to rein in inflation, data showed Monday.

Banks’ outstanding household loans came to 1,049.9 trillion won (US$790 billion) as of end-March, down 700 billion won from a month earlier, according to the data from the Bank of Korea (BOK).

This marked the third consecutive month of an on-month decline following a 4.7 trillion-won contraction in January, the sharpest monthly decline since relevant data started to be compiled in January 2004.

In February, household loans declined 2.8 trillion won from the previous month.

Banks’ home-backed loans rose 2.3 trillion on-month to 800.8 trillion won in March, while unsecured and other types of loans fell 2.9 trillion won to 247.8 trillion won.

Mortgage loans swung to an upturn thanks to increased apartment transactions and the implementation of special loans designed to help more people buy homes at lower interest rates, the BOK said.

Borrowing costs in Asia’s fourth-largest economy remain high following the BOK’s aggressive monetary tightening aimed at bringing surging inflation under control. The central bank has raised its policy rate by a combined 3 percentage points since August 2021.

Last year, outstanding household loans slipped for the first time in 18 years.

Banks' household loans keep falling in March amid high borrowing costs - 1