Banks to rein in mortgages next quarterKorean banks are expected to further tighten their grip on mortgage loans in the fourth quarter amid the financial watchdog’s push to curb growing household debt, the central bank said yesterday.
An index gauging lender attitudes on mortgage loans came in at minus 28 for the October-December period, compared with minus 25 tallied in the third quarter, according to a survey of 16 lenders conducted by the Bank of Korea.
The fourth-quarter data marked the lowest level since the index reached minus 41 in the first quarter of 2007, it added.
The lower the reading, the more likely that banks will tighten their restrictions on lending. A reading below zero means that the number of lenders that will tighten their grip on lending surpasses that of banks planning to ease lending criteria.
“Affected by the regulator’s move to stem household debt, lenders are expected to further stiffen their grip on mortgage loans,” said Shin Hyeong-wook, deputy director general of the BOK’s financial stability analysis team.
Korea is grappling with growing household debt and concerns that households’ high indebtedness will curb consumer purchasing power, hurting economic growth.
In June, the Financial Services Commission unveiled a set of measures to curb household debt, which reached 876.3 trillion won ($734.1 billion) as of end-June.
But despite such steps, the growth of household loans accelerated in July and August, prompting the regulator to warn banks. Several major banks halted the extension of fresh home loans in mid-August.
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