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Logos of five major commercial banks in South Korea from top: Shinhan, Hana, KB Kookmin, Woori and NH NongHyup. (Herald DB) |
The trend of Korean households being less willing to take out loans due to burdensome high lending rates continued in March, according to industry sources.
In March, the remaining balance of household loans at the five major banks -- KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup -- decreased by 4.68 trillion won ($3.55 million) compared to the previous month, to 680.7 trillion won.
This downward trend has been persistent for 15 consecutive months since January last year.
The reduction in the outstanding balance of household loans shows that the total amount that is repaid to banks exceeded the total amount of new loans taken out by clients.
The outstanding balance of housing mortgage loans also decreased by 1.55 trillion won to 511.23 trillion won. This drop in March was larger than the previous month's decline of 572 billion won.
The balance of credit loans at the end of March also decreased by 2.54 trillion won compared to February to 110.94 trillion won. This marks the 16th consecutive month of decline in credit loan balances since December 2021.
The balance of loans for jeonse, a unique home rental system in Korea where a tenant pays a lump-sum deposit to a landlord, also dropped by 1.9 trillion won compared to the previous month to 126.61 trillion.
Meanwhile, due to the low interest rates offered on savings accounts, fewer people are opting to save their money for the long term at local commercial banks.
As of the end of last month, the total amount deposited in five major banks decreased by 18.26 trillion won compared to the previous month, to 1,871.53 trillion won.
Fixed-term deposits decreased as well, with the total balance dropping to 805.33 trillion won at the end of last month, down 10.36 trillion won from the previous month.
The balance of installment savings deposits decreased by 231.2 billion won to 37.9 trillion won as well.
However, the balance for demand deposit accounts, which allows withdrawal at any time without advance notice, increased by 10.11 trillion won to 619.26 trillion won in March.
This indicates that despite having available funds, people are reluctant to make long-term investments due to the unattractive low interest rates offered.
