It is expected to be difficult to get loans from banks in the third quarter of this year as well. Government regulations that cap total lending continue, so banks are keeping conservative screening standards. Although demand for dwellings loans will fall due to the recent rate hikes, demand for unsecured loans is expected to rise as customers seek funds to invest in the domestic stock market.
According to the Financial Institutions Lending Practices Survey of loan officers at financial institutions by the Bank of Korea on the 20th, the loan attitude index for household dwellings (dwellings mortgage loans, jeonse loans, etc.) at 18 domestic banks was minus (-) 11 in the third quarter. A negative loan attitude means banks plan to conduct stricter loan screening. It eased from the previous quarter (-19), but the lending threshold remains high.
Household general (unsecured loans, overdraft loans, etc.) recorded -14. It eased from the previous quarter (-22) but tightened compared with the first quarter (-6).
Loan officers expected demand for unsecured loans and overdraft loans to increase. With the KOSPI surging in a short period, they saw that "bit-too," or borrowing to invest in stocks, would continue. In contrast, demand for dwellings-related loans was projected to decline. Additional real estate regulations and the Bank of Korea's base rate hikes have made it burdensome to take out loans.
In particular, demand for corporate loans was judged to increase for both large corporations and small and midsize companies. Tensions between the United States and Iran have flared anew, and corporate bond yields have risen. The yield on three-year corporate bonds (credit rating AA-) rose to 4.38% at the end of June from 3.46% at the start of the year.
Credit risk for households and corporations was seen increasing across the board. The delinquency rate on corporate loans at domestic banks (principal and interest past due for one month or more) rose to 0.84% in May from 0.59% in December last year. The Bank of Korea expected, "Household credit risk will also increase due to concerns about a decline in the debt repayment capacity of vulnerable borrowers."