Banks’ household loan growth accelerates in Sept. despite tightened lending rules

SEOUL– South Korean banks’ household loans grew at a faster pace in September from a month earlier despite the government’s toughened controls on lending, central bank data showed Wednesday.

According to the Bank of Korea (BOK), outstanding bank loans to households came to 1,052.7 trillion won (US$877.9 billion) as of the end of September, up 6.5 trillion won from the previous month.

The figure is higher than a 6.1 trillion-won increase registered in August, the data showed. The reading also marked the second-largest on-month expansion for September since relevant data began to be compiled in 2004.

The increase is attributable to a rise in banks’ unsecured and other non-mortgage loans, which grew 800 billion won from the previous month, the data showed.

“An upward trend in line with what was reported in August continued due to demand for loans for home purchases and ‘jeonse,'” a BOK official said.

Jeonse refers to a home rental system unique to South Korea in which tenants pay a large sum of money as a deposit instead of paying monthly fees.

Mortgage loans stood at 769.8 trillion won in September, up 5.7 trillion won from the previous month. The figure was slightly down from a 5.8 trillion-won increase tallied a month earlier.

The rise in September household loans came despite the government’s toughened regulations on lending amid worries that household debts could spiral out of control and undercut economic growth.

On Tuesday, the BOK kept its policy rate unchanged at 0.75 percent for October but hinted at another rate hike before the end of this year following a quarter percentage-point increase in August in a bid to rein in inflation and household debts.

Meanwhile, banks’ lending to businesses came to 1,049 trillion won as of end-September, up 7.7 trillion won from a month earlier. The growth was slightly lower than 7.9 trillion won tallied in August.

Source: Yonhap News Agency

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