Although household loans from banks increased by more than 5 trillion won last month, the pace of growth slowed compared to the previous month. This was due to a slowdown in demand for credit loans used for 'margin investing (investing with debt)' as the domestic stock market underwent a sharp correction.
According to the Bank of Korea's "July 2026 Financial Market Trends" report released on the 14th, household loan balances at banks reached 1,194 trillion 800 billion won last month, an increase of 5 trillion 400 billion won from the previous month.
The increase expanded from 6 trillion 900 billion won in May to 7 trillion 600 billion won in June, but fell by 2 trillion 200 billion won in July. However, compared to the 2nd trillion 700 billion won increase recorded in July of last year, it remains at roughly double that level.
A Bank of Korea official stated, "In July, both mortgage-backed loans and other loans saw a slowdown in growth, but household loan growth still exceeds typical annual levels, so we are monitoring the situation with caution." The official added, "Recent developments in the housing market and changes in real estate-related policies may have complex effects on future loan demand, making it difficult to predict trends after August."
Mortgage-backed loans were recorded at 948 trillion 400 billion won, an increase of 3 trillion 400 billion won from the previous month. The growth rate narrowed by 900 billion won compared to June's 4 trillion 300 billion won increase. While the impact of increased housing transactions in the capital area during April and May continued with a time lag, the decline in jeonse (rental deposit) transactions persisted, and demand for interim payments on second-quarter housing supply also slowed.
Jeonse financing loans decreased by 600 billion won in May, 700 billion won in June, and further dropped by 800 billion won in July.
Other loans, including credit loans, increased by 2 trillion won. Although the growth rate narrowed for two consecutive months from 3 trillion 700 billion won in May to 3 trillion 300 billion won in June, it remains at a high level compared to typical years.
The slowdown in individual stock investment demand due to the stock market correction is believed to have curbed the growth of 'margin investing (investing with debt).' The net purchase amount of domestic stocks by individuals rose from 42 trillion 600 billion won in May to 52 trillion won in June, but plummeted to 3 trillion 400 billion won in July.
The KOSPI experienced high volatility and a sharp decline due to concerns over the artificial intelligence (AI) industry, uncertainty in Middle East geopolitical developments, and continued net selling by foreign investors. The KOSPI fell from 8,476 at the end of June to 6,595 at the end of July.
A Bank of Korea official noted, "Other loans tend to increase alongside credit loan demand as stock investments rise. However, with recent sharp corrections in stock prices, the growth rate is gradually slowing." The official added, "Although levels remain somewhat higher than typical years, we expect other loans to stabilize once the stock market stabilizes."
In contrast, corporate loans from banks increased by 7 trillion 700 billion won to reach 1,421 trillion 100 billion won, up from the previous month. The growth rate expanded compared to June's 5 trillion 100 billion won increase.
Corporate loans for large enterprises increased by 3 trillion 800 billion won as demand for working capital continued to repay corporate bonds and previously repaid loans at the end of the previous quarter were renewed. SME (small and medium-sized enterprise) loans rose by 3 trillion 900 billion won due to demand for value-added tax payments and expanded loan operations by some banks.
Corporate direct financing market fundraising was weak. Corporate bonds saw a net repayment of 1 trillion 900 billion won due to issuance burdens from rising interest rates and seasonal off-season effects. Commercial paper (CP) and short-term corporate bonds returned to a net issuance of 4 trillion won as loans temporarily repaid at the end of the quarter were reissued.
Bank deposits decreased by 30 trillion won last month. Demand deposit accounts dropped sharply by 80 trillion 800 billion won as corporate funds temporarily deposited for quarterly financial ratio management withdrew, compounded by demand for value-added tax payments.
In contrast, time deposits increased by 42 trillion 300 billion won, supported by banks securing loan funding sources, managing regulatory ratios, and some large enterprises depositing surplus funds.
Deposits at asset management companies fell by 42 trillion 800 billion won. The decline was largely driven by a 56 trillion 200 billion won reduction in stock fund balances due to falling stock prices. However, new funds for stock funds excluding valuation fluctuations saw a net inflow of 11 trillion 400 billion won. Money market funds (MMF) received an inflow of 27 trillion 200 billion won as corporate funds that had withdrawn at the end of the quarter returned.
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