The Financial Services Commission held a meeting to discuss the current household debt situation with officials from the relevant government ministries and organizations on October 12.
In September (up KRW2.4 trillion), household debt growth decelerated significantly compared to the previous two months (up KRW5 trillion to KRW6 trillion). However, as the slowdown in the trend of household debt growth could have been affected by temporary and seasonal factors, such as a drop in credit loans due to inflows of Chuseok holiday bonuses and the end-quarter write-off of bad debt by specialized credit finance businesses, the authorities concluded that it is necessary to continue to monitor the trends for some time to determine whether the current slowdown can be seen as a sustained one.
In the banking sector, both individual mortgage loans and policy mortgage loans expanded at notably slower rates backed by the household debt management measures taken by the financial authorities. The pace of decline in other types of loans also expanded. In particular, with borrowers’ repayment capabilities being reviewed more strictly, the amount of newly issued 50-year mortgage loans dropped from KRW4.8 trillion in August to KRW4.2 trillion in September. The authorities expect that the strengthened long-term mortgage lending measure will start to have fuller effect beginning in October. The nonbanking sector also saw a larger decline in household loans (down KRW0.8 trillion in August → down KRW2.5 trillion in September) due to increases in market rates and inflows of holiday bonuses.
The authorities had a favorable assessment about the latest household debt statistics, but shared the same view on the need to continue to closely manage the pace of household debt growth as it can be influenced by housing market and interest rate situations. Therefore, the financial authorities will promptly implement the household debt management measures (such as introducing a stressed DSR limit within this year) and continue to seek improvements if deemed necessary.
* Please refer to the attached file for details.