Household loans across the financial sector have decreased for the first time this year. A significant drop in credit loans and a slowdown in the growth of mortgage loans contributed to this decline. Financial authorities believe that concerns over a year-end 'loan cliff' are limited, citing the upward adjustment of total household loan management targets and separate management of group loans.
According to the Financial Services Commission's report on 'September 2026 Household Loan Trends (Provisional)' released on the 15th, total household loans across the financial sector fell by 2.2 trillion won last month compared to the previous month. This marks the first net decrease since a drop of 1.2 trillion won in December of last year.
The decline in other loans expanded from 1.5 trillion won in August to 5.5 trillion won in September, leading to the overall decrease in household loans. Among these, credit loans decreased by 3 trillion won, a larger drop than the 400 billion won reduction in the previous month. Analysts suggest that the recent adjustment in the stock market has dampened demand for investment funds, contributing to the decline in credit loans.
The growth of mortgage loans also slowed. Last month, mortgage loans in the financial sector increased by 3.3 trillion won, falling short of the 4.3 trillion won increase in the previous month. The increase in bank loans decreased from 4.1 trillion won to 2.9 trillion won, while the increase in secondary financial institutions rose from 200 billion won to 400 billion won.
As household loans have turned to a decreasing trend, the burden of total management for financial companies at year-end is expected to ease somewhat. The financial authorities have raised the annual total management target and are managing group loans, such as moving expenses, interim payments, and final payments, separately from the total management targets for financial companies, which also alleviates some pressure.
Shin Jin-chang, head of the Financial Services Commission's Secretariat, stated, “Given that we have recently adjusted the total management target for household loans upward and are managing group loans separately from the total management targets for financial institutions, concerns about a year-end loan cliff are likely to be limited.”
However, the decrease in credit loans does not directly translate into an increase in mortgage supply. Seo Ji-yong, a professor at Sangmyung University’s Business School, noted, “Excluding group loans from total management is a measure to support actual demand, and since mortgages are managed separately, the reduction in credit loans does not automatically convert into mortgage capacity. The potential for limited expansion exists depending on each bank's remaining limits and the borrower's total debt repayment ratio (DSR).”
* This article has been translated by AI.
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