Korea’s household debt sees ‘balloon effect’ as rules tightened in Seoul

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Korea’s household debt sees ‘balloon effect’ as rules tightened in Seoul - Korea Economic Daily

Quick Summary:

Data showed household loans provided by secondary financial institutions alone increased by 2 trillion won in October from the month prior.“October’s total household lending, including those from the five major banks and regional, internet banks and secondary financial institutions, seems to be similar to or even greater than the previous month’s 5.2 trillion won,” said a commission official.

Local banks, internet banks, savings banks, cooperatives and other second-tier financial institutions have aggressively attracted households and individuals by offering them relatively lower mortgage loans – a strategy to expand their client base and increase profits.On Oct.8, Busan Bank unveiled its mortgage product "ONE Home Loan,” which charges an annual interest rate of 3.76%, lower than KB Kookmin Bank’s 3.99% and Shinhan Bank’s 4.26%.

South Korea’s household loan market is witnessing the balloon effect as tighter government lending rules in Seoul and its surrounding metropolitan area prompt people to flock to regional, online and secondary financial institutions.