A real estate brokerage in Gangnam-gu, Seoul last month. /Courtesy of News1

As real estate prices and asset prices such as stocks in Seoul and the metropolitan area rise sharply, the phenomenon of 'young-gul' (borrowing to the point of tapping into one's soul) and 'bit-tu' (borrowing to invest) is starting again. According to the financial sector on the 22nd, the household loan balance of the five major banks (KB Kookmin, Shinhan, Hana, Woori, NH Nonghyup) was 752 trillion 749 billion won as of the 19th, an increase of 3 trillion 9937 billion won from the end of May (748 trillion 812 billion won). This amounts to an average daily increase of 2 billion 102 million won, the highest since August last year (3 billion 105 million won), when the largest young-gul phenomenon occurred. If this trend continues, household loans are expected to increase by 6 trillion 3000 billion won by the end of this month, setting a new record high since August last year (9 trillion 6259 billion won).

Home mortgage loans (including lease loans) account for about 80% of total household loans, at 596 trillion 6471 billion won. This is an increase of 2 trillion 9855 billion won compared to the end of May (593 trillion 6616 billion won). If this trend continues, the mortgage loan balance is expected to increase by 4 trillion 7000 billion won by the end of this month.

Not only real estate but also demand for stock market investments has increased, resulting in a rise in credit loans. As of the 19th, the credit loan balance was 104 trillion 4027 billion won, an increase of 1 trillion 882 billion won from the end of May (103 trillion 3145 billion won). This averages out to 573 million won per day, and is projected to increase by 1 trillion 7755 billion won by the end of this month. This marks the fastest pace in four years since July 2021 (1 trillion 8637 billion won).

On the 20th, the KOSPI index rises by 44.10 points (1.48%) compared to the previous day, recording 3021.84. It is the first time the KOSPI has surpassed the 3000 mark since December 28, 2021, after 3 years and 6 months. /Courtesy of News1

This phenomenon is analyzed to be due to the expectation of rising home prices combined with the implementation of the three-stage debt service ratio (DSR), which will reduce loan limits in July. Demand to secure loans before the regulation begins has surged. According to the Bank of Korea, the housing price outlook consumer sentiment index (CSI) hit a low of 99 in February and has since risen to 111 last month, indicating growing expectations for home price increases.

Major banks have already begun measures to suppress loan demand. NH Nonghyup Bank will cease handling transfers from other banks' face-to-face and non-face-to-face mortgage loans starting on the 24th, while SC First Bank has shortened the mortgage loan maturity from a maximum of 50 years to 30 years as of the 18th. A reduction in maturity will lead to a decrease in loan limits. The financial sector predicts that if the young-gul and bit-tu fervor does not cool down, additional regulations will emerge.

If this phenomenon continues, it will become difficult for the Bank of Korea to lower the benchmark interest rate. The Bank of Korea significantly lowered its economic growth forecast for this year from the previous 1.5% to 0.8% in the revised economic outlook released last month. While economic slowdown persists, the benchmark interest rate must be kept steady to stabilize housing prices and household loans.