Demand for household general loans in South Korea surged to its highest level in six years during the second quarter, even as commercial banks tightened their lending standards, the Bank of Korea’s latest loan‐behaviour survey shows. The household general loan-demand index climbed to 31 in Q2, up 14 points from 17 in the previous quarter and marking the strongest reading since the 41 recorded in Q2 2020. A positive value indicates more institutions reported increased demand than those reporting declines.

In contrast, banks grew more cautious: the household loan-attitude index fell from –8 in Q1 to –22 in Q2, reflecting a majority of lenders strengthening credit assessments. Housing‐loan trends mirrored this divergence. The housing-loan demand index rose from –36 in Q3 last year to 0 in Q4, then dipped to –8 in Q1 before rebounding to 11 in Q2. Meanwhile, the housing-loan attitude index slipped from –6 in Q1 to –19 in Q2, signaling tougher underwriting standards despite brighter borrower appetite.

Banks’ concern over household repayment capacity also intensified. The household‐credit‐risk index jumped from 11 in Q4 2022 to 19 in Q1 2023 and 31 in Q2, the highest level since Q1 2023’s 39 reading. Lenders increasingly expect credit risks to rise even as more households seek loans.

By comparison, small and medium enterprises (SMEs) saw robust borrowing conditions. SME loan demand in Q2 stood at 22 and their credit‐risk index at 31—both high readings—yet the SME loan-attitude index was a positive 11, indicating that banks eased standards for corporate clients while tightening them for households.

The Bank of Korea expects these trends to continue in the third quarter, forecasting household general-loan demand to moderate to an index of 14 and housing-loan demand to fall back to –6. Lenders’ attitudes toward both loan types are projected to remain conservative at –14 for general loans and –11 for mortgages.

A banking industry insider noted that policy emphases on productive financing, combined with a drive to curb household debt growth, leave financial institutions inclined to take on corporate‐sector risk while managing household exposure more cautiously.