South Korean household debt and lending trends

South Korea is experiencing significant shifts in its household lending landscape. During the second quarter of 2024, new household loans reached their lowest level in 13 quarters. According to Bank of Korea data, the average new loan amount per borrower fell to 34.14 million won. Mortgage loans saw a particularly sharp decline, with the average new amount per borrower dropping by 21.1 million won compared to the previous quarter—the largest single-quarter decrease since 2013. This decline was most pronounced among borrowers in their 30s and 40s, though the 20s age group saw a slight increase, likely due to first-time homebuyers.

Despite the drop in new lending, the average outstanding household debt balance per borrower rose to 97.9 million won, driven by a slowdown in loan repayments and tightened lending management.

By September, outstanding household loans at five major South Korean banks—KB Kookmin, Shinhan, Hana, Woori, and NH NongHyup—fell for the first time in six months, totaling 781.39 trillion won. This decrease occurred as banks maintained self-imposed restrictions to manage rapid borrowing, even as the government relaxed certain loan caps. While mortgage loans also declined, outstanding household loans excluding policy loans showed an upward trend, increasing by 108.7 billion won. Additionally, average interest rates on new household loans rose by 0.14 percentage points in the same period.

Concurrently, the balance of insurance contract loans has surged, nearly matching mortgage loan levels within a single year, as borrowers shift toward insurance-backed credit due to stricter mortgage regulations.