Demand for new loans to rise in Q2

Demand for fresh loans from major local lenders in Korea is likely to rise in the second quarter, central bank data showed Thursday.

The overall index measuring demand for bank loans came to 8 for the April-June quarter, compared with 12 a quarter earlier, the Bank of Korea (BOK) said in a statement.

A reading above zero means bank lending will continue to increase, while a reading below the benchmark means demand will likely shrink.

The quarterly reading is based on a survey of 15 banks and 184 nonbank lenders between March 2 and 17.

Demand for fresh loans from big companies is expected to grow in the second quarter, while the index gauging the demand from small and medium-sized companies comes to 20 for the April-June period, compared with 13 for the previous quarter, it said.

The BOK said demand for new mortgages is likely to decrease in the second quarter due to a possible slowdown in home transactions and a rate hike.

The government has tightened restrictions on housing-related borrowings to put a cap on rapidly growing household debt.

Korea’s outstanding household credit - which is composed of household loans and credit card spending - came to 1,344.3 trillion won ($1.19 trillion) at the end of 2016, up 11.7 percent from a year earlier.

A separate index measuring demand for fresh loans from local savings banks came to 13 for the second quarter, up from 11 a quarter earlier, according to the BOK.

YONHAP