S.Korea's household debts post 3rd-largest growth on record-low rates

Household debts in South Korea posted the third-largest monthly growth in history on the back of record- low interest rates, central bank data showed Wednesday.

Debts owed by households to banks and non-bank deposit takers amounted to 763.3 trillion won (641 billion U.S. dollars) as of end-July, up 3.3 trillion won from a month earlier, according to the Bank of Korea (BOK).

Non-bank deposit takers include savings banks, credit unions, community credit cooperatives and mutual financial companies.

Including the mortgage loans transferred to the state-run Korea Housing Finance Corp. for securitization purpose, the actual increase in household debts reached 9.5 trillion won in July, marking the third-biggest monthly growth.

The largest monthly increase of 10.1 trillion won was tallied in June this year, with the second-largest being a 9.9 trillion- won expansion in April this year.

The surge in debts among households came after the central bank cut its policy rate in June to an all-time low of 1.5 percent. The BOK lowered the rate by 25 basis points in March to 1.75 percent after cutting it by the identical extent in August and October last year each.

Amid the record-low rates, people rushed to purchase home with borrowed money. Apartment transactions in the Seoul metropolitan area came in at 12,100 in July, almost tripling the average monthly home transactions of 4,600 between 2006 and 2014.

Average rate for mortgage loans among banks fell below 3 percent at an annualized rate of 2.96 percent in July. Endi