Household loan drop most in 10 years

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Household loan drop most in 10 years

Korean banks’ household loans declined by the largest-ever amount in January as the expiration of tax benefits on home purchases squeezed demand, the central bank said yesterday.

Household loans, including home-backed and credit loans, amounted to 463.1 trillion won ($426.2 billion) as of the end of January, down 3.5 trillion won from the previous month, according to the Bank of Korea.

The January reading marked the largest monthly fall since the BOK began to compile related data in January 2003, it added.

Korea’s property market is in the doldrums as the local economy loses steam and more households delay buying homes on the chance prices will fall further.

In January, banks’ outstanding mortgage lending fell 2.3 trillion won month-on-month to 314.7 trillion won, after growing by 5 trillion won in December, the BOK said.

The January mortgage data also marked the largest monthly decline since the central bank began to compile related data in January 2003.

But if mortgage loans transferred to the state-run Korea Housing Finance Corporation are taken into account, the January loans inched up 400 billion won, according to the BOK.

Meanwhile, banks’ corporate lending rebounded last month as companies began borrowing again after repaying debt in December to improve their year-end balance sheets, the BOK said.

Corporate loans gained 4.7 trillion won month-on-month to 593.7 trillion won, after declining 11.8 trillion won in the previous month.

Banks’ lending to small and medium enterprises, or SMEs, grew at a faster pace than loans to larger companies as local banks were seen as staying in line with the incoming government’s pledge to support smaller businesses.

Banks’ lending to SMEs rose 3.1 trillion won to 449.9 trillion won after falling 7.7 trillion won in December, it added.

The data came a day before the BOK holds its monthly rate-setting session.

Analysts said the BOK is likely to freeze the key interest rate at 2.75 percent for the fourth straight month in February. Yonhap

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