The outstanding loan balance of household unsecured loans at commercial banks surged sharply over two months. Banks have raised the bar for mortgage loan and jeonse deposit loans to manage total lending, but overdraft accounts, which can be drawn within the approved limit without additional screening, remain a variable.
According to the banking sector on the 21st, the outstanding loan balance of household unsecured loans at the five major banks (KB Kookmin, Shinhan, Hana, Woori, NH Nonghyup) stood at 106.5154 trillion won at the end of May and 108.6704 trillion won at the end of June, increasing by more than 2 trillion won for two consecutive months. It rose from the 104 trillion won range in January–April, starting in May.
The pace of increase quickened this month. From the 1st to the 14th of this month, household unsecured loans increased by 1.3914 trillion won, bringing the outstanding balance to 110.0618 trillion won. Converted to an average daily increase, it accelerated from 70.1 billion won in May, 71.8 billion won in June, to 99.4 billion won in July.
The outstanding loan balance of household unsecured loans includes amounts used from overdraft accounts. Overdraft accounts can be drawn at any time within the already approved limit without a separate application. The average utilization rate of overdraft limits at the five major banks rose from about 38% at the end of June last year to 45.8% at the end of last month, up 7.8 percentage points over a year.
Banks cite the increase in transactions of dwellings in the Seoul metropolitan area ahead of the end of the capital gains tax heavy taxation grace period on May 9 as one factor behind the rise in overdraft utilization. They also said the uptrend gained speed as a single-stock leverage product tracking Samsung Electronics(005930)·SK hynix(000660) shares twofold on May 27 spurred demand for so-called "debt investment."
To curb rising home prices, the government capped this year's growth rate of household loans in the financial sector at 1.5% from a year earlier. Accordingly, banks are reducing loan limits for mortgage loan and jeonse loans, but overdraft accounts are a variable because customers can use them freely within their approved limits, making usage unpredictable. If customers use their overdraft accounts up to the limit, banks could hit this year's lending target early, bringing on a "lending cliff" sooner. Because overdraft accounts are products with limits already approved, banks have no way to block withdrawals.
An official at a commercial bank said, "Even if new loans are restricted, overdraft account balances can be a variable in total volume controls, so we are paying special attention."