SEOUL, Sept. 13 (Yonhap) — South Korean banks saw a sharp uptick in household loans in August, with the total amount reaching the highest level in over two years, driven by a demand for home-backed loans despite high borrowing costs.
According to the Bank of Korea, banks’ outstanding household loans totaled 1,075 trillion won (US$808.9 billion) at the end of August, a 6.9 trillion won increase from the previous month. This marks the largest on-month gain since July 2021, when the loans rose by 9.7 trillion won. The August figure also reflects five consecutive months of growth, following a 5.9 trillion-won, 5.8 trillion-won, 4.2 trillion-won, and 2.3 trillion-won increase in July, June, May, and April, respectively.
Home-backed loans rose 7 trillion won to 827.8 trillion won, while unsecured and other types of loans declined by 0.1 trillion won to 246 trillion won.
The high borrowing costs in the country come as a result of the Bank of Korea’s aggressive monetary tightening measures to contain inflation. Last month, the BOK kept its benchmark rate unchanged at 3.5 percent, the fifth consecutive month of a rate freeze in the face of a murky growth outlook and moderating inflation. The rate freezes followed seven consecutive hikes in borrowing costs since April last year.
In response to the rising household loan level, financial authorities held a meeting Wednesday and agreed to take steps to prevent further increases. They announced a set of planned measures to tighten controls on household loans, including strengthening requirements for long-term housing mortgage loans and focusing policy financing on low-income households.