In the third quarter of last year, households' spare cash increased by 6.7 trillion won from the previous quarter. Household income grew due to the distribution of consumption coupons, and liabilities such as mortgage loan and other loans decreased after the June 27 measures were released. As a result, the household debt-to-nominal gross domestic product (GDP) ratio edged down from the previous quarter to 89.3%.
According to the Bank of Korea (BOK)'s "Flow of funds for the third quarter of 2025 (preliminary)" released on the 8th, the net funds raised by households and nonprofit institutions increased to 58 trillion won in the third quarter from 51.3 trillion won in the second quarter of last year. The net funds figure rose in the first quarter of last year (+30.3 trillion won), fell in the second quarter (-41.6 trillion won), then turned to an increase again.
Net funds are the amount obtained by subtracting loans from financial institutions (funding) from money managed through deposits, bonds, insurance, and pension reserves (investment). It is interpreted as the surplus funds economic entities can use. If funding exceeds investment and the spare cash turns negative (-), it is described as net borrowing.
The increase in net funds for households and nonprofit institutions was due to expanded investment alongside reduced funding. In the third quarter of last year, households' investment amounted to 78.8 trillion won, up 1.9 trillion won from 76.9 trillion won the previous quarter. In contrast, funding decreased from 25.6 trillion won to 20.7 trillion won, down 4.9 trillion won.
A Bank of Korea (BOK) official said, "As the government distributed consumption coupons, households' investment increased, expanding net funds." The official added, "With the release of the June 27 measures that limit mortgage loan caps in the Seoul metropolitan area and the three-stage stress DSR measures, funding decreased, which also had an effect."
As funding fell, the household debt ratio also declined. According to the Bank of Korea (BOK), the household debt-to-nominal GDP ratio in the third quarter of last year was 89.3%, down 0.4 percentage point (p) from the previous quarter (89.7%). This is the lowest level since the end of the third quarter of 2019, before the spread of COVID-19, when it was 88.3%.
By contrast, in the corporate institutional sector centered on nonfinancial corporations, the trend of net borrowing continued. Net borrowing reached 19.5 trillion won, up 16 trillion won from 3.5 trillion won the previous quarter. It is the largest net borrowing since 33 trillion won in the third quarter of 2024. Compared with the previous quarter, investment increased by 55.4 trillion won to 80.9 trillion won, while funding rose by 71.3 trillion won to 100.4 trillion won.
General government shifted from net borrowing of 2.7 trillion won in the second quarter of last year to net funds of 5.9 trillion won in the third quarter. Although investment shrank from 38.2 trillion won to 33.7 trillion won, funding fell more sharply from 40.9 trillion won to 27.9 trillion won. Net funds in the domestic sector, including households, corporations, and general government, totaled 46.3 trillion won, up 4.8 trillion won from the second quarter of last year (41.5 trillion won).
As of the end of the third quarter of last year, the financial assets held by Korea's households and nonprofit institutions stood at 5,980.4 trillion won, and financial liabilities at 2,420.8 trillion won. They increased by 183 trillion won and 15.8 trillion won, respectively, from the previous quarter. Net financial worth, which is financial assets minus financial liabilities, was 3,559.6 trillion won. The ratio of financial assets to financial liabilities was 2.47 times, the highest on record. With stock values rising sharply, the valuation of financial assets held by households increased significantly.
Meanwhile, the Bank of Korea (BOK) on this day released for the first time the "detailed flow of funds table," a detailed item in the flow of funds statistics. The detailed flow of funds table shows money flows between economic agents and financial institutions and is derived by summing the claims and debt held by each institutional sector. According to the statistics, as of the end of 2024, the total funds exchanged among five institutional sectors—banks, households, corporations, insurance and pensions, and nonbanks—was 1,670.69 trillion won. That was up 92.8 trillion won from the end of the previous year (1,577.89 trillion won).