|A signboard directs customers to the sections for personal loans at a commercial bank in Seoul in this November 2021 file photo. Korea Times file|
By Yi Whan-woo
Households are borrowing more money from banks again, adding to concerns over high household debt and creating headaches for the Bank of Korea (BOK) which is believed to be on track to end a credit tightening cycle.
According to the banking industry, monthly borrowings by households from five major commercial banks ― KB Kookmin, Shinhan, Hana, Woori and NH NongHyup ― amounted to 677.6 trillion won ($518.76 billion) in May.
The amount was up 143.1 billion won from April and marks the first increase in 17 months.
The household loans taken out from the five lenders had been decreasing as the BOK aggressively hiked its key interest rate for more than a year to counter high inflation.
The key interest rate was kept steady from January when it reached its 14-year high of 3.5 percent.
In the meantime, household debt decreased by 7.8 trillion won for the entirety of 2022, marking the first fall in 18 years.
Household debt then shrank by 13.7 trillion won in the first three months of this year.
"Such a fall can be stopped if the household loans rise again," an industry source said.
It noted that household debts were estimated to be around 3,000 trillion won as of last year, and that Korea's household debt-to-GDP ratio ― currently at 102.2 percent ― is the highest among major economies.
The source also noted that the BOK, despite its denial, faces growing market belief that its tightening cycle is over and that it may even lower the rate in the months to come.
"Against this backdrop, the BOK will be pressed to think over its monetary policy," the source added.
A BOK official said deleveraging, a process undertaken to reduce the amount of total debt, "should last in the mid-to-long term," acknowledging the country's household debt-to-GDP ratio is at a worrisome level.
The sources speculated that household loans may continue to rise as the real estate market is recovering.
Of the borrowings from households in May, 509.6 trillion won accounted for home loans. The amount was up 693.5 billion from a month earlier
During the cited periods, credit loans fell by 258.3 billion won to 109.6 trillion won.