Bank lending rates in S. Korea rise for 2nd straight month

Bank lending rates in South Korea rose for the second straight month on expectations of further interest rate hike in the United States, central bank data showed Wednesday.

Rates for fresh household loans extended by banks averaged an annualized rate of 3.23 percent in December, up 0.07 percentage points from the previous month, according to the Bank of Korea (BOK).

Mortgage loan rates advanced 0.08 percentage points from a month earlier to 3.12 percent in December, fueling worries about growing burden for households to repay debts.

The higher borrowing costs came amid widespread expectations that the U.S. Federal Reserve would continue to tighten its monetary policy after raising its zero-rate in December for the first time in about a decade.

Higher U.S. interest rates tend to encourage South Korea's central bank to hike its policy rate as delayed response could cause an abrupt foreign capital outflow from the South Korean financial market in search for higher-yielding assets.

The BOK has kept its benchmark interest rate on hold at an all-time low of 1.5 percent after lowering it twice last year.

Banks' corporate loan rates advanced in December, with loans for big companies rising by 0.04 percentage points and the loan rates for small firms gaining by 0.06 percentage points.

Time deposits rate of banks averaged an annualized rate of 1.72 percent in December. Periodical deposits rate was up 0.03 percentage points to 1.84 percent. Endit