What Caused Household Borrowing in S. Korea to Surge in May?
Click to start listening
Synopsis
In May, South Korea saw a dramatic increase in household loans, primarily due to rising housing transactions as banks relaxed lending regulations. This marks the largest monthly gain in eight months, signaling a noteworthy shift in the financial landscape amid a monetary easing cycle. Can this trend continue, or will it lead to further debt challenges?
Key Takeaways
- Household loans in South Korea rose by 5.2 trillion won in May.
- Outstanding loans reached 1,155.3 trillion won.
- The growth marks the largest monthly increase since September 2024.
- Home-backed loans increased by 4.2 trillion won.
- Corporate loans also saw a rise of 8 trillion won.
Seoul, June 11 (NationPress) Household loans issued by banks in South Korea experienced a significant increase in May, as per the latest data from the central bank released on Wednesday. This surge was primarily driven by a rise in housing transactions.
As of the end of May, the total outstanding household loans reached 1,155.3 trillion won (approximately US$845.07 billion), marking an increase of 5.2 trillion won compared to the previous month, according to the Bank of Korea (BOK).
This figure represents the largest month-on-month growth since September 2024, when household loans saw a rise of 5.6 trillion won. Notably, this is the fourth consecutive month of increases.
Home-backed loans increased by 4.2 trillion won from the previous month, totaling 918.0 trillion won as of the end of May. This growth rate was higher than the 3.7 trillion-won increase recorded in April.
Additionally, unsecured and other types of household loans rose by 1 trillion won to reach 236.3 trillion won, according to the data.
“The recent uptick in home transactions has had a tangible effect on loan growth,” stated BOK official Park Min-cheol during a press briefing.
“As we are currently in a cycle of monetary easing, we are carefully monitoring the situation to ensure that increased liquidity does not lead to rising housing price expectations or further escalate household debt levels,” he emphasized.
The increase in home transactions can be attributed to the relaxation of lending regulations by banks earlier this year, coupled with the Seoul city government's partial lifting of land transaction permissions.
Nationwide, apartment transactions surged from 26,000 in January to 39,000 in February, and then to 50,000 in March. In April, the number of transactions dropped slightly to 41,000.
In the capital city of Seoul, apartment contracts rose from 3,300 in January to 6,200 in February and further to 9,500 in March, before falling to 5,000 in April.
In response to rising real estate prices, the Seoul municipal government reinstated its land permission regulations in March, requiring prior approval from local authorities for transactions involving apartments in specific affluent districts.
Corporate loans also saw an uptick in May, fueled by increased lending from major banks and heightened demand for operating funds among large corporations.
Loans to businesses rose by 8 trillion won in May, following a substantial 14.4 trillion-won increase in April.
The total outstanding corporate loans reached 1,346.6 trillion won as of the end of May, according to the data.
Additional data from the Financial Supervisory Service (FSS) indicated that household loans across all financial institutions rose by 6 trillion won in May, up from a 5.3 trillion-won increase the previous month.
Home-backed loans from all financial entities, including savings banks and insurance companies, increased by 5.6 trillion won last month, also surpassing the 4.8 trillion-won growth in April.
Other types of loans to households grew by 0.4 trillion won last month, compared to a 0.5 trillion-won decline in the preceding month.
The Financial Services Commission (FSC) announced plans to intensify monitoring of home-backed loans in the metropolitan area.
Point of View
Our commitment is to deliver accurate and timely news. The recent rise in household borrowing in South Korea highlights the evolving economic environment shaped by regulatory changes and market dynamics. Our focus remains on providing insights that reflect the trust and expertise our audience expects.
NationPress
20/06/2025
Frequently Asked Questions
What caused the increase in household loans in South Korea?
The increase was primarily driven by a surge in housing transactions following relaxed lending regulations by banks and the partial lifting of land transaction permissions by the Seoul city government.
How much did household loans increase in May?
Household loans rose by 5.2 trillion won in May, reaching a total of 1,155.3 trillion won.
What are the implications of rising household debt?
Rising household debt could lead to increased financial strain on families and may raise concerns about potential housing market bubbles if not monitored carefully.
Is the increase in loans indicative of economic recovery?
While the increase in loans may suggest growing economic activity, it is essential to balance this with responsible lending practices to mitigate risks.
How are corporate loans trending?
Corporate loans also increased in May, with an 8 trillion won rise, reflecting robust demand for operating funds among large businesses.
