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Leveraged property and stock investment is showing signs of a rapid recovery, propelled by expectations of a rate cut by the Bank of Korea (BOK) in the latter half, market watchers said Sunday.

Many opened overdraft accounts from banks or took out margin loans from brokerages. The two charge higher interest rates, with the stock loan carrying a risk of facing margin calls whereby securities firms can sell borrowers' shares at the lowest price to recover loans in cases of steep price falls. An overdraft places a certain limit on funds borrowable even when the account holder has insufficient funds. Interest will be charged only on the amount spent.

According to market data, the combined household loan balance of the country's top five commercial lenders — KB Kookmin, Shinhan, Hana, Woori and NH NongHyup — came to 710.7 trillion won ($513 billion),Thursday, up over 2.1 trillion won in just four business days.

This is a continuation of a 35-month spike in their household loans of over 5.3 trillion won in June.

Home mortgages soared to 552.9 trillion won, up 838.7 billion won from 552.1 trillion. Unsecured loans registered an increase of 1.08 trillion won this month, more than offsetting last month's decline of 214.3 billion won.

The increase of over 1 trillion won in unsecured loans is explained by the initial public offering (IPO) of a gaming firm, Shift Up, from Tuesday to Wednesday.

A significant portion of the subscription total of 18.5 trillion won was funded from unsecured loans, market watchers say.

The leveraged equity market investors are seeking to capitalize on the much-awaited return of bullish equity market sentiment, as evidenced by the KOSPI registering a 29-month high last week.

The main bourse surged to 2,862.23 points, Friday, the highest since Jan. 18, 2022, when it hit 2,902.79 points.

The U.S. stock market indexes hours earlier saw both the S&P 500 and the tech-heavy Nasdaq ending with new all-time highs.

The balance of margin loans stood at 20.02 trillion won, July 4, up from 17.4 trillion won at end-2023.

Many say retail investors likely have sought unsecured loans to increase their holdings of U.S. shares, since margin loans are limited to the local equity market.

"I recently took out unsecured loans to invest in leading U.S. IT shares," an office worker surnamed Kim said. "The borrowing rates are a bit higher, but not to the extent that my investments are in jeopardy. The American tech share will remain bullish further, and I will be more than able to pay off the interest."

Meanwhile, Bank for International Settlements data showed Korea's household debt service ratio (DSR) relative to income was the fourth-highest among 17 major countries, exacerbated by the sustained elevated interest rates despite stagnant household income.

Korea's DSR for the household sector came to 14.2 percent, following Norway (18.5 percent), Australia (18 percent) and Canada (14.4 percent).

DSR measures debt repayment obligations as a percentage of income. The higher the number, the greater the burden.