The South Korea Financial Services Commission reported that household lending across the financial sector rose by KRW 2.6 trillion in August, down from increases of KRW 6.4 trillion in July and KRW 4.8 trillion a year earlier. Mortgage lending growth accelerated to KRW 4.3 trillion from KRW 3.6 trillion, but other lending fell by KRW 1.7 trillion as credit loans returned to contraction. Bank household lending increased by KRW 3.4 trillion, while lending by nonbank financial institutions declined by KRW 0.8 trillion.

At a household debt review meeting, the commission assessed implementation of its Aug. 13 housing finance package. Measures effective from Aug. 31 include revised loan to value calculations for relocation loans, adjusted first time buyer criteria and wider use of future income in debt service ratio assessments. Financial institutions were instructed to maintain funding for housing supply, young people and borrowers with genuine financing needs while meeting their revised aggregate lending targets.

The commission warned that seasonal demand and separate management of collective housing loans could sustain mortgage growth. As rising interest rates increase repayment burdens, it plans to review financial institutions’ fixed rate mortgage lending and encourage banks to introduce long term fixed rate products.

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