South Korean Banks Plan Tighter Household Lending Standards but Expect Higher Demand for Some Loans in Third Quarter

South Korean banks plan to tighten lending standards for households in the third quarter, a Bank of Korea survey released Monday showed. The index of banks' lending attitudes for households stood at minus 7 for the July-September period, down from minus 2 in the second quarter. Yonhap reported that the survey polled 203 financial institutions, including 18 banks.

A reading below zero indicates that a majority of lenders plan to tighten standards. The index has remained negative for six consecutive quarters since the second quarter of 2025. Financial authorities have tightened regulations on household lending since late 2024 to address surging household debt and rising housing prices in Seoul and surrounding regions.

The Bank of Korea said both mortgage and non-mortgage household loans will face tighter conditions as regulatory efforts continue. Lending attitudes toward large corporations and small and medium-sized enterprises are projected to remain unchanged from the previous quarter.

Demand for household mortgage loans is expected to decline, while demand for general household loans is projected to increase due to demand for stock market investment funds.

Demand for corporate loans is also forecast to rise for both large firms and SMEs amid uncertainties from the crisis involving Iran.