Increasing Household Loans
According to the Bank of Korea, South Korean banks’ household loan balance excluding mortgage loans totaled 166.3 trillion won at the end of last month, up approximately 500 billion won in one month.
The amount has soared since last year and increased by no less than 5.1 trillion won this year alone. Although the increment had been 1.9 trillion won or so in 2014, it jumped to eight trillion won in the following year. Under the circumstances, the household loan balance excluding mortgage loans exceeded lending provided for large corporations for the second consecutive month. Specifically, the amounts at the end of June this year were 165.8 trillion won and 163.8 trillion won.
Last month, the former exceeded the latter by two trillion won as well. This overtaking for the first time since December 2013 can be attributed to an increasing number of households opening overdraft accounts for money for living expenses with their income rarely increasing amid the ongoing economic recession. In contrast, large corporations’ dependence on bank lending is on the decline nowadays as they are reducing investment and procuring financial resources through stock issue and the like. “The recent key interest rate cut has resulted in a decrease in lending rate, which, in turn, is increasing credit loans as well as household mortgage loans,” said a local bank executive.