Mortgage lending across South Korea's financial sector rose by 4.3 trillion won ($3.1 billion) last month, a wider increase than in July, even as a drop in unsecured loans slowed the overall pace of household debt growth.
The Financial Services Commission said on the 9th, after a meeting to review household debt, that household lending across all financial institutions rose 2.6 trillion won in August from the previous month. Monthly increases have now declined for three straight months, from 9.3 trillion won in May to 8.3 trillion won in June and 6.4 trillion won in July.
Mortgage lending moved the other way. Sector-wide mortgage growth came to 4.3 trillion won last month, 700 billion won more than the 3.6 trillion won recorded in July. At banks, mortgage growth rose to 4 trillion won from 3.5 trillion won over the same period. The increase was driven by banks' own mortgage products — excluding policy loans such as Didimdol and Beotimmok loans and Bogeumjari Loan — which grew 2.9 trillion won, up from 2.5 trillion won. Group lending, which is managed separately from overall loan volume targets, expanded by 1.2 trillion won, up from 900 billion won.
Other lending, including unsecured personal loans, fell 1.7 trillion won across the financial sector, reversing course. Household lending at non-bank institutions such as insurers, mutual finance firms and specialized credit finance companies also declined by 800 billion won from the previous month.
Regulators pointed to a rise in the number of new homes ready for occupancy as the main reason behind the recent mortgage growth. "Mortgage lending increased because housing transactions rose ahead of the expiration of the grace period on heavier capital gains taxes, and because balance-payment loans were drawn down as more new homes became ready for occupancy in July and August," said Shin Jin-chang, secretary general of the Financial Services Commission.
To ease the burden on borrowers from rising interest rates, the commission plans to encourage banks to introduce long-term fixed-rate mortgages. It will also continue to monitor how much fixed-rate mortgage lending financial institutions are handling.
