South Korean household loans rise despite tighter bank rules
· UPIAug. 3 (Asia Today) -- Household borrowing at South Korea's five largest banks increased by more than 4 trillion won for a second consecutive month despite tighter limits on mortgages and unsecured loans.
The combined household loan balance at KB Kookmin Bank, Shinhan Bank, Hana Bank, Woori Bank and NH Nonghyup Bank reached 778.98 trillion won ($529.4 billion) at the end of July, financial industry data showed Monday.
The balance increased by 4.02 trillion won ($2.73 billion) from the end of June. Household loans had risen by 4.14 trillion won ($2.81 billion) in June.
Mortgage borrowing accounted for most of the increase.
Outstanding mortgage loans at the five banks rose by 2.8 trillion won ($1.9 billion), or 0.45%, to 617.94 trillion won ($420 billion).
It was the largest monthly mortgage increase in 11 months, since the balance rose by 3.7 trillion won ($2.52 billion) in August 2025.
The increase continued despite efforts by the government, financial regulators and banks to restrict household borrowing.
KB Kookmin Bank reduced its maximum home-purchase mortgage from 600 million won ($408,000) to 300 million won ($204,000) in July. Other major banks restricted access to mortgage insurance programs that can allow borrowers to receive larger loans.
The measures have not yet significantly reduced borrowing demand as expectations of higher home prices remain strong, particularly in Seoul and the surrounding metropolitan area.
The Bank of Korea's housing price outlook index rose 7 points to 127 in July, its highest level since September 2021. A reading above 100 indicates that more consumers expect housing prices to rise than fall.
Unsecured personal loans also increased for a third consecutive month, although the pace of growth slowed.
The balance of unsecured loans at the five banks stood at 109.75 trillion won ($74.6 billion) at the end of July, up 1.08 trillion won ($736 million) from June.
The loans had increased by more than 2 trillion won in each of the previous two months.
Financial authorities have urged commercial banks to strengthen controls on unsecured borrowing amid concerns that individuals are taking out loans to invest in stocks.
Banks have responded by reducing limits on personal loans and overdraft credit lines and restricting new loan applications submitted through online comparison platforms.
Demand for unsecured loans has nevertheless continued amid volatile stock trading.
Some investors reportedly borrowed additional money to avoid forced sales of stocks purchased with leverage after the South Korean market experienced a sharp correction. Market analysts identified excessive leverage and the unwinding of leveraged exchange-traded fund positions as factors that intensified the sell-off.
A commercial bank official said the full effects of recently announced lending restrictions might not appear immediately.
"There is generally a lag of about two months after the government or banks announce new restrictions," the official said.
The official said mortgage applications can take two to three months to proceed from submission to disbursement.
"We will have to monitor the situation longer to determine whether the current regulations are effective, but demand for unsecured loans continues to increase," the official said.
-- Reported by Asia Today; translated by UPI
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Original Korean report: https://www.asiatoday.co.kr/kn/view.php?key=20260803010000685