South Korea’s Top 5 Banks Seen Cutting Household Loans by About 400 Billion Won in February

Household loan balances at South Korea’s five biggest banks are expected to fall for a third straight month, pressured by tougher government debt controls and rising interest rates. The tightening is reshaping money flows across property and broader asset markets, though a stock-market rally could still revive borrowing to invest.

According to the financial sector on the 2nd, household loan balances at KB Kookmin, Shinhan, Hana, Woori and NH NongHyup stood at 765.4257 trillion won as of Feb. 26. That was down about 387.4 billion won from 765.8131 trillion won at the end of January. With one business day left and month-end swings typically larger, the February decline is expected to be around 400 billion won.
 
After rising by 1.5125 trillion won in November, the combined balance turned lower in December, falling 456.3 billion won. The drop widened in January to 1.8650 trillion won. If balances fall again in February, it would mark the first three-month streak of declines since last year.

Market participants say the government’s strict household-debt stance, including measures announced on June 27 and Sept. 7 last year, is starting to bite. Banks, in line with financial regulators, have not eased lending standards. Some caution, however, that it remains unclear whether the decline reflects structural deleveraging or simply supply constraints from regulation.

Higher borrowing costs are also weighing on demand. Deposit banks’ mortgage rates averaged 4.29% in January, the highest level in 1 year and 2 months since November 2024 (4.30%). With interest burdens rising, borrowers have been delaying new loans.

Property-related lending continues to shrink. Mortgage loans fell 1.4836 trillion won in January, switching to a month-on-month decline for the first time in 1 year and 10 months since March 2024. In February, they are expected to fall by about 50 billion won from the end of the prior month. Jeonse loans, which have been declining for six months, are expected to drop by more than 200 billion won in February.

Unsecured credit loans, which had seen more repayments due to early-year bonuses and Lunar New Year payments, also moved into decline in February. As of Feb. 26, credit-loan balances at the five banks were down 250.1 billion won from the end of January.
 
Still, volatility in asset markets is a key variable. With the Kospi extending its rally and topping the 6,300 level for the first time, some expect investment demand using credit loans to pick up again. Parts of the brokerage industry have turned more optimistic, with some even projecting a Kospi target of 8,000.

A banking official said fear of missing out is building as the market heats up. “For now, loans are being restrained by rate burdens and regulation, but if the stock market remains overheated, we cannot rule out an increase in credit loans,” the official said.