Slowdown in household loans due to debt brakesKorean banks’ household loans grew at a slower pace in November than the previous month as mortgage loan growth eased, affected by the government’s efforts to curb household debts, the central bank said yesterday.
Local banks’ household loans, including home-backed and credit loans, reached 453.2 trillion won ($402 billion) as of the end of November, up 1.4 trillion won from the previous month, according to the Bank of Korea (BOK).
The November growth slowed from a 3.2 trillion won gain in October when the growth of home loans hit a four-month high, the BOK added.
The central bank said that banks extended fewer housing loans related to supplies of new apartments, which charge relatively low rates.
Banks’ mortgage lending grew by 1.5 trillion won on-month to 303.6 trillion won as of end-November.
The growth slowed from a 2.4 trillion won expansion tallied in October.
Korea is struggling to put a lid on snowballing household debt as high indebtedness is feared to curb consumer spending, hurting economic growth.
In the third quarter, private spending grew a mere 0.4 percent from three months earlier as households were reluctant to spend money amid high inflation and economic uncertainty.
Meanwhile, Korean banks’ corporate lending grew at a slower pace in November than in October mainly because large companies secured funds via debt sales, it added.
Corporate loans by local banks rose by 4.2 trillion won on-month to 565.3 trillion won, easing from a 7.4 trillion won gain in October, the BOK added.
Bank lending to large firms grew 2.2 trillion won to 114 trillion won and lending to smaller firms expanded 2 trillion won to 451.3 trillion won, the central bank said.
The data came one day before the BOK holds its monthly rate-review session. Analysts forecast that the BOK is likely to freeze the key interest rate at 3.25 percent for the sixth straight month on risks from the euro zone debt crisis.
As the rising debt situation is reaching a level of threatening the solvency of the financial market and overall economy, the government has been implementing various means to curb the rising household debts.
Household loans have been rising rapidly as the central bank lowered the key borrowing rate to 2 percent after the global financial crisis sparked by the collapse of Lehman Brothers in 2008 and kept a loose monetary policy. Although the central bank has raised the rate to 3.25 percent this year, it is still considered low.
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