Bank household loans in S. Korea post second-highest growth on low rates

Bank loans to households in South Korea posted the second-highest monthly growth on the back of the record-low policy rate, central bank data showed Wednesday.

Debts owed by households to banks amounted to 594.5 trillion won (523.5 billion U.S. dollars) as of end-June, up 8.1 trillion won from a month earlier, according to the Bank of Korea (BOK).

It was the largest monthly increase except for an 8.5-trillion- won growth in April this year, which was the record-high monthly gain since the BOK began compiling the data in 2008.

The rapid growth came after the BOK cut its benchmark interest rate in June by a quarter percentage point to an all-time low of 1. 5 percent. The bank lowered it below 2 percent in March for the first time in history after cutting it by 25 basis points in August and October last year respectively.

Helped by the low level of lending rates, mortgage loans extended by banks stood at 439.6 trillion won, up 6.8 trillion won from a month ago.

It was the second-largest monthly increase for home-backed loans except the 8-trillion-won gain in April this year.

Housing transactions surged amid low lending rates. Apartment trading in the capital Seoul was 11,300 units last month, doubling the average transaction volume of about 5,800 between 2006 and 2014.

Household credit loans, excluding mortgages, increased 1.3 trillion won in June from a month earlier.

Corporate loans by banks rose 2.3 trillion won on-month in June, down from increases of 6.2 trillion won in April and 3.7 trillion won in May respectively. Endi