Household loan level rises again

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Household loan level rises again


Household loans from financial institutions including commercial banks have risen for the second consecutive month.

According to the Bank of Korea yesterday, household loans as of the end of April totaled 656.5 trillion won ($578 billion), 1.4 trillion won more than the previous month. April’s household loan total was second only to the all-time high of 659.9 trillion won in December.

Borrowing eased in January and February after the Lee Myung-bak administration’s tax breaks on real estate transactions ended Dec. 31. Household loans started to rise again in March, adding 600 billion won to the February total, and expanded again in April after the Park Geun-hye administration announced measures to boost the real estate market. Household loans in April grew 2.6 percent compared to the same month last year.

Loans from commercial banks expanded by 900 billion won in April to 463.3 trillion won, while those from nonbanking institutions like savings banks were up 500 billion won to 193.2 trillion won.

Housing related loans including mortgages shrunk in April, whereas nonhousing loans saw sharper growth. Housing-related loans fell 0.1 percent year-on-year to 401.1 trillion won and non-housing loans grew 1.5 percent to 255.4 trillion won. The central bank said the housing loan total fell because conforming loans by the Korea Housing Finance Corp. went up. The state-run housing finance company allows the so-called “house poor,” those who have trouble paying off interest or principal as their home’s value drops, to repay over as long as 30 years at low interest.

The conforming loan was designed to ease the housing burden while spurring the real estate market.

One concerning indicator in April’s household loan growth is the increase in non-housing loans, which include loans that use people’s deposit and savings accounts for collateral. In most cases, such loans are used for daily necessities.

Areas excluding greater Seoul added 1.5 trillion won in household debt in April to 245 trillion won; greater Seoul, including Gyeonggi, added 100 billion won to 411.5 trillion won.

In an effort to spur the stagnant economy, whose quarterly growth has remained below 1 percent the past two years, the government has rolled out a stimulus package that includes a 17 trillion won supplementary budget approved by the National Assembly in May. The central bank also chipped in by lowering the key borrowing rate that same month from 2.75 percent to 2.5 percent, the first change since October.

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