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Household loans at banks increased by 7.6 trillion won last month, marking the biggest rise in 1 year and 10 months. This is attributed to an increase in apartment transactions in the Seoul metropolitan area ahead of the resumption in May of heavier capital gains taxation on multi-homeowners, and a sharp rise in ‘debt-fueled investing’ (borrowing to invest) in the stock market. The government asked financial institutions to strengthen management of household lending.

According to the Bank of Korea’s Financial Market Trends released on the 9th, the outstanding balance of household loans at depository banks stood at 1,189.4 trillion won at end-June, up 7.6 trillion won from end-May. In terms of monthly increase, it was the largest since August 2024 (9.2 trillion won).

Household loans at depository banks fell from December last year through February this year, then turned to an increase in March (+500 billion won), and the rise has widened through April (2.1 trillion won) and May (6.9 trillion won) into June.

This was largely driven by growth in mortgage lending. Last month, the outstanding balance of bank mortgage loans was 945 trillion won, up 4.3 trillion won from end-May. It was the biggest increase in a year since June last year (5.1 trillion won). The Bank of Korea pointed to increased housing transactions in the Seoul metropolitan area in April~May and demand to pay interim installments on apartments already pre-sold.

In fact, the number of apartment transactions in the metropolitan area, which had just exceeded 20,000 per month, surged as multi-homeowners rushed to list ‘last train’ properties ahead of the reinstatement of the heavier capital gains tax, reaching 27,000 in March, 28,000 in April, and 29,000 in May.

By contrast, jeonse deposit loans fell by 700 billion won last month, marking a decline for 10 consecutive months since last September. Park Min-cheol, a deputy head of the Bank of Korea’s Market Oversight Team, said, “The number of jeonse transactions themselves has decreased, and the shift from jeonse to monthly rent is under way,” and added, “We are also seeing some jeonse demand shift to purchase demand in outer areas of the metropolitan region.”

The outstanding balance of other bank loans also rose last month to 243.5 trillion won, up 3.3 trillion won from the previous month. Although the increase was smaller than in May (3.7 trillion won), it still posted growth in the 3 trillion won range. The Bank of Korea assessed that more people took out unsecured loans to invest in stocks amid the KOSPI’s uptrend in May~June.

According to the Financial Services Commission’s announcement that day, household loans across the entire financial sector, including the secondary financial sector, increased by 8.3 trillion won in June. Although the rise was smaller than in May (9.3 trillion won), it remained sizable. Most of the increase came from banks (7.6 trillion won), while household lending by secondary financial institutions such as card·capital companies and savings banks rose by only 700 billion won.

The outstanding balance of corporate loans at depository banks was 1,413.4 trillion won, increasing by 5.1 trillion won in June. Due to disposals and write-offs of non-performing loans at banks and reduced loan supply at some specialized banks, the increase was somewhat smaller than in May (5.4 trillion won).

Banks’ deposit balances in June rose by 28.8 trillion won to 2,622.5 trillion won.

Shin Jin-chang, Secretary General of the Financial Services Commission, convened a joint inspection meeting on household debt at the Government Complex Seoul and said, “Given that mortgage loans are typically executed with a lag of 2∼3 months after a home purchase contract is signed, the impact of the increased transaction volume ahead of the end of the temporary relief from heavier capital gains taxation could be reflected in mortgage loans for some time,” asking financial institutions to step up management of household lending.