South Korea sees smaller decline in household bank lending in February

South Korea’s household bank lending declined at a slower pace in February 2026, with the decrease narrowing to 387.4 billion won, compared to a 1.865 trillion won drop in January, according to financial industry data. This moderation followed sustained government efforts to curb speculative housing activity, including tightened mortgage caps and stricter lending rules in Seoul and designated speculative zones since October 2024 as reported. Despite these measures, household loan balances remained in a three-month downward trend, reflecting reduced demand amid high interest rates and regulatory pressures.

Conversely, corporate lending expanded significantly, with major banks increasing their corporate loan portfolios by 5.6652 trillion won in February—the largest rise in six months. This shift aligns with government-led initiatives promoting "productive finance," redirecting credit toward businesses while managing household debt risks. Large corporations and small-to-medium enterprises saw loan growth of 3.9011 trillion won and 1.7641 trillion won, respectively, as banks adjusted strategies to diversify revenue streams.

The Bank of Korea noted that seasonal factors, such as the March housing market activity and impending expiration of capital gains tax relief, could temporarily boost lending in early 2026. However, long-term household loan growth remains constrained by regulatory frameworks and elevated borrowing costs. Analysts suggest the structural reallocation of credit from households to corporations may solidify as a medium-term trend, driven by policy priorities and banks' pursuit of higher-risk-adjusted returns.