S. Korea's household debts grow at fast pace on low rates

Household debts in South Korea kept a fast-growing trend last month on low interest rates, financial watchdog data showed Thursday.

Outstanding debts owed by households to local banks came in at 615.1 trillion won (539 billion U.S. dollars) as of end-September, up 6.2 trillion won from a month earlier, according to the Financial Supervisory Service.

The September growth was down from a 7.7 trillion-won increase in August, but it increased at a fast pace on the back of low borrowing costs that led to demand for home transactions.

Mortgage loans extended by banks increased 5.9 trillion won from a month earlier to 457.3 trillion won as of the end of September, after growing 6 trillion won in August.

Household debts began to rise at a rapid clip from the second half of last year as the Bank of Korea cut its policy rate by a quarter percentage point in August and October last year each. The bank lowered it by the same amount in March and June this year to an all-time low of 1.5 percent.

Corporate loans by banks stood at 750.9 trillion won at the end of last month, up 7 trillion won from the previous month.

The delinquency ratio of bank loans was 0.66 percent as of end-September, down 0.1 percentage point from a month earlier and 0.2 percentage points from a year ago.

The bad debt ratio for home-backed loans came in at 0.4 percent at the end of September, down 0.06 percentage points from the previous month and 0.19 percentage points from the same month of last year. Endit