Banks Tighten Household Loans Further, Targeting Growth Rate Around 1%

Homeownership through mortgage loans is expected to become even more difficult this year as commercial banks’ household loan growth rates are capped at around 1%.

According to financial industry sources on January 12, one major commercial bank has agreed with financial authorities to manage its household loan growth rate (excluding policy loans) at 0.7% for the year. Applying this growth rate to the bank’s household loan balance at the end of last year, the bank can increase household loans by approximately 800 billion won this year.

While the Financial Services Commission presented a 1.5% growth rate target for household loans across the entire financial sector through its “2026 Household Debt Management Plan” on January 1, individual banks’ actual targets are being set lower than this figure. The banking sector, which has larger loan volumes, is expected to set targets below 1.5%, while other sectors such as savings banks and mutual finance institutions may set higher targets.

If the five major banks—KB, Shinhan, Hana, Woori, and NH Nonghyup—set their average target at 1%, the maximum household loan increase for the year would be 6.4493 trillion won ($4.7 billion). This figure is calculated based on household loan balances excluding policy loans at the end of last year, which stood at 644.9342 trillion won. This translates to approximately 537.4 billion won per month, or just over 100 billion won on average per bank among the five major banks.

To achieve these targets, banks will have no choice but to further strengthen their household loan suppression measures. As of January 9, household loans (excluding policy loans) at the five major banks had decreased by 6.4704 trillion won compared to the end of last year, so there is no immediate risk of reaching the limit. However, problems could arise if housing transactions increase and loan demand recovers.

The government has set a goal to reduce the household debt-to-nominal GDP ratio to 80% by 2030 through strong aggregate management. Korea’s household debt-to-nominal GDP ratio stood at 88.6% at the end of last year. A banking industry official said, “If loan demand recovers, additional loan regulations such as suspending mortgage insurance (MCI/MCG) enrollment will be inevitable, as was the case last year.”