Last month, household loans in the banking sector fell by more than 2 trillion won from the previous month. It was the largest December decline on record, which is seen as the result of strengthened oversight by financial authorities to curb growth in household loans ahead of year-end.
According to the Financial market trends in December released by the Bank of Korea on the 14th, banks' outstanding loan balance for household loans last month was 1,173.6 trillion won. That was down 2.2 trillion won from the previous month.
In particular, mortgage loan decreased by 700 billion won. Mortgage loans, which had only been rising, fell for the first time in 34 months since February 2023 (down 300 billion won). The resulting outstanding loan balance for mortgage loan was 935 trillion won. Bank of Korea Financial Markets Department Vice Minister Park Min-cheol said, "Government policies (such as the June 27 measures tightening real estate loans), stricter lending attitudes within the financial sector, and a decrease in jeonse transaction all worked together."
Other household loans, including unsecured loans (1,237.7 trillion won), also fell by 1.5 trillion won. It was the first decline in three months. Vice Minister Park said, "Demand for stock investment funds has slowed recently," adding, "Seasonal factors, including larger-than-usual bond sales and write-offs, led to the decrease." Banks sell or write off nonperforming loans on a quarterly basis, which has the statistical effect of reducing the outstanding household loans balance.
Corporate loans (1,363.9 trillion won) also fell by 8.3 trillion won from the previous month. To manage financial ratios, corporations temporarily repaid credit lines, reducing large corporate loans (294.9 trillion won) by 2 trillion won. Loans to small and midsize companies (1,069 trillion won) decreased by 6.3 trillion won as major banks scaled back lending operations to manage capital ratios. Net issuance of corporate bonds also fell by 700 billion won as investment demand declined ahead of year-end book closing (account closing).
Meanwhile, bank deposits increased by 7.7 trillion won from the previous month. Demand deposits, where corporate funds are temporarily parked, rose.