The outstanding balance of household loans at banks has topped 1,200 trillion won for the first time. The balance at the end of October was 1,203.9 trillion won. It rose by 5 trillion won in a month.
The Bank of Korea on the 11th released “Financial Market Trends in October 2026.” The figures are preliminary estimates that include bank trust accounts and policy mortgages. The October increase is 10 times September’s 500 billion won. It is the largest in three months, since July’s 5.5 trillion won. It also exceeded the 3.5 trillion won increase in the same month a year earlier.
Base rate hikes also failed to curb loan growth. The BOK raised rates in July and August in succession to set the rate at 3.00%. The rate applied to household loans newly extended by deposit banks in September was 4.96%, nearing 5%. The mortgage rate was 4.88%, the highest in 14 years and 5 months. Even so, household loans took a brief breather in September and then grew again in October.
Total household loans including the secondary financial sector also returned to growth. According to the Financial Services Commission and the Financial Supervisory Service, household loans across all financial sectors rose by 6.4 trillion won in October. They had fallen by 2.2 trillion won in September. That is also more than last October’s increase (4.9 trillion won). The secondary financial sector, including mutual finance, insurers, savings banks and specialized credit finance companies, also rose by 1.4 trillion won. All sectors shifted to growth.
Mortgages are at the center of the increase. Bank mortgages rose by 3.3 trillion won in October, a bigger gain than September’s 2.9 trillion won. The balance is 958.7 trillion won. Banks’ own general mortgages actually fell from an increase of 1.6 trillion won to 1.4 trillion won. Group loans expanded from 700 billion won to 1.2 trillion won. Policy loans such as Didimdol and Beotimmok also rose by 1.2 trillion won. The two items combined, at 2.4 trillion won, accounted for 73% of the increase in bank mortgages.
Since the Aug. 13 measures were announced, financial authorities have excluded the net increase in group loans from household loans subject to aggregate management. Group loans across all financial sectors rose by 2.4 trillion won in October. It is the biggest increase in six months, since April (2.6 trillion won).
“Individual mortgages stayed at a level similar to the previous month, and the expansion of group loans such as interim payments and relocation funds in October had an impact,” said Lee Seung-yeop, deputy head of the BOK’s Financial Markets Department. Financial authorities diagnosed, “Despite a decline in housing transactions in the Seoul metropolitan area, mortgage growth was sustained because of increased execution of group loans that had already been approved.”
In the second half, the pace of mortgage growth has picked up markedly. According to BOK data, bank mortgages rose by a cumulative 5.6 trillion won from January to May. The cumulative increase from June to October was 18.1 trillion won, more than triple. The increase grew despite rising rates and fewer transactions because balance-payment loans for homes already under contract and interim-payment loans for presale complexes are being disbursed with a time lag.
Jeonse loans moved the other way. They fell by 800 billion won in the banking sector, declining for the 14th straight month. Lee explained that jeonse transactions are slowing in a trend.
Other loans, including credit loans, rose by 1.7 trillion won in the banking sector. They had fallen by 2.3 trillion won in September. Across the whole financial sector, credit loans fell by 2.9 trillion won in September and rose by 1.2 trillion won in October. A base effect was at work, as credit loans had fallen in September because of holiday bonuses. It is also interpreted that individual investors, who were net sellers of about 12.4 trillion won on the KOSPI in September, turning to net buying in October had an effect.
The BOK was cautious about the outlook. Lee pointed out that even as housing transactions in the Seoul metropolitan area decline, prices are rising in Seoul’s outlying districts and key areas of Gyeonggi Province. He added, “Household loans move in tandem with housing market conditions, so it is hard to predict now how they will develop.” He also said, “With variables pointing in different directions, it is hard to say with confidence that household loans will slow.”
According to Korea Real Estate Board data, Seoul apartment prices rose 0.07% in the first week of November (as of the 2nd). That is 91 straight weeks of increases. Gangnam District (-0.39%) and Seocho District (-0.37%) fell for the 13th week. Outlying areas continued to be strong, including Seodaemun District (0.31%), Seongbuk and Geumcheon districts (0.30%) and Jungnang District (0.28%). Gyeonggi Province rose 0.20%. Yongin’s Giheung District posted the nation’s highest rise at 0.60%, followed by Gunpo (0.57%), Anyang’s Dongan District (0.55%) and Hwaseong’s Dongtan district (0.49%).
Bank corporate loans rose by 10.2 trillion won in October. It followed a large increase in September (10.7 trillion won). Loans to small and mid-sized companies rose by 6.2 trillion won on demand such as value-added tax payments. Loans to large companies rose by 4 trillion won, partly because banks put more weight on lending and companies needed funds to repay corporate bonds.