South Korea's household debt tops W2,000tr for first time, surging at fastest pace in nearly 5 years

Q2 household credit reaches 2,019.8 trillion won, up 25.9 trillion in three months

Other loans outpace mortgages as Bank of Korea cites stock investment demand

Kim Seong-jun, head of the financial statistics team at the Bank of Korea's Economic Statistics Bureau, speaks at a briefing on the second-quarter household credit (preliminary) at the Bank of Korea in Jung-gu, Seoul, on Wednesday. [Bank of Korea]

South Korea's total household debt surpassed 2,000 trillion won ($1.42 trillion) for the first time in history in the second quarter of this year. The quarterly increase was the largest in four years and nine months, driven by a rise in home purchases that swelled mortgage balances and a flood of money into the stock market that sharply pushed up other loans, including credit loans.

According to the Bank of Korea's preliminary household credit report for the second quarter of 2026, released Wednesday, the outstanding balance of household credit at the end of the second quarter stood at 2,019.8 trillion won. That is up 25.9 trillion won from the end of the previous quarter (1,993.9 trillion won) — the largest quarterly increase since the third quarter of 2021 (+34.8 trillion won) and nearly double the first-quarter gain of 14.8 trillion won.

Household credit is a broad measure of household debt that combines loans taken from banks, insurers, consumer finance companies and public financial institutions with outstanding card balances not yet settled. The figure has now risen for nine consecutive quarters since the second quarter of 2024.

Household loans drove much of the increase. The outstanding balance of household loans at the end of the second quarter reached 1,891.3 trillion won, up 24.9 trillion won over three months — also the largest quarterly gain since the third quarter of 2021 (+34.6 trillion won).

Particularly notable was the surge in other loans, a category that includes credit loans, which was the primary force behind the overall rise in household debt.

Customers conduct banking business at a branch in Yeouido, Seoul. [Lim Se-jun]

Mortgage loans rose 12.2 trillion won from the previous quarter to 1,190.8 trillion won, while other loans climbed 12.8 trillion won to 700.5 trillion won. The increase in other loans was the largest since the third quarter of 2021 (+13.7 trillion won), and it marked the first time since the second quarter of 2021 that the gain in other loans exceeded that of mortgages.

Household loans at deposit banks also swung back to growth. The outstanding balance of household loans at commercial banks reached 1,022.9 trillion won, up 13.3 trillion won from the previous quarter — a sharp reversal from the 200 billion won decline recorded in the first quarter. Mortgages accounted for 6.8 trillion won of the increase, while other loans contributed 6.5 trillion won.

By contrast, household loans at non-bank deposit-taking institutions — including mutual finance cooperatives, savings banks and credit unions — rose 3.1 trillion won to 328.1 trillion won, a significantly smaller gain than the 8.2 trillion won increase in the previous quarter. Mortgages at these institutions grew 3.6 trillion won, while other loans fell 500 billion won.

Household loans at other financial institutions, including insurers, securities firms and asset securitization companies, rose 8.6 trillion won to 540.3 trillion won. Within that group, mortgage growth was limited to 1.8 trillion won, while other loans surged 6.8 trillion won. The outstanding balance of sales credit — card spending not yet settled — rose 900 billion won to 128.5 trillion won, led by specialized credit finance companies.

The Bank of Korea attributed the second-quarter rise in household debt to increased housing transactions and demand for stock investment financing.

Kim Seong-jun, head of the Bank of Korea's financial statistics team, said mortgage-related borrowing grew because home sales picked up ahead of the reinstatement of the capital gains tax surcharge in the second quarter, and because demand for group loans tied to previously pre-sold housing units also contributed.

The government's temporary suspension of the capital gains tax surcharge expired May 9, restoring the heavier tax burden on multi-home owners in designated adjustment areas.

On the surge in other loans, Kim said it appeared to reflect demand for stock investment financing, adding that the increase in credit loans was "unusually large compared with the typical scale."

However, whether the government's recent easing of regulations on group loans — covering relocation loans, interim payments and balance payments — will immediately translate into further growth in household lending remains to be seen, he said.

"Relocation loans are not something that happen quickly or easily," Kim said. "It remains to be seen at what point and on what scale they will materialize."

On the slowdown in loan growth at non-bank lenders, he added that it was "the result of strengthened management by the government and supervisory authorities."

forest@heraldcorp.com