2nd LD Writethru: S.Korea freezes interest rates at record low

South Korea's central bank on Tuesday froze its policy rate at a record low of 2 percent, refraining from altering the rate for four straight months.

Bank of Korea (BOK) Governor Lee Ju-yeol and six other policy board members decided to keep the benchmark seven-day repurchase rate on hold at 2 percent.

Despite uncertainties at home and abroad, the BOK was widely expected to freeze the rate as the bank lowered it in August and October in 2014.

The bank sought to wait and see the effect from the previous rate cuts amid growing household debts caused by easing regulations on mortgage financing and a decline in lending rate stemming from the policy rate cut.

Debts owed by households to banks amounted to 562.3 trillion won (511 billion U.S. dollars) as of end-January, up 1.4 trillion won from a month earlier.

Loan demand from households tended to fall in January when companies pay year-end bonuses and the housing market is seasonally weak.

The unusual increase came as the financial regulator eased regulations on mortgage financing, resulting in brisk housing transactions. Nationwide home transactions soared 34.1 percent to 79,320 in January, logging the highest January figure since the data began to be compiled in 2006.

The U.S. Federal Reserve is widely expected to end its "zero- rate" policy within this year, discouraging the BOK from cutting its policy rate further.

The widening of difference in interest rates between the two countries could cause a foreign capital exodus from South Korea. Endi