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S. Korea's mortgage loan rates fall to record low on policy rate cut

Xinhua, July 28, 2016 Adjust font size:

Rates for mortgage loan in South Korea fell to a fresh record low as Bank of Korea (BOK) cut its policy rate to an all-time low last month, central bank data showed on Thursday.

Home-backed loan rates extended by commercial banks averaged an annualized rate of 2.77 percent in June, down 0.12 percentage points from a month earlier, according to the BOK. It marked the lowest since the bank began compiling relevant data in September 2001. The previous record low was 2.81 percent tallied in April 2015.

Lower mortgage rates reduce debt-servicing burden for households, but higher rates boost the record-breaking household debts that would weigh down on private consumption over the long run.

The lower rates came as the BOK lowered its benchmark interest rate by a quarter percentage point to a new record low of 1.25 percent last month.

Bank rates for overall household loans stood at 3.06 percent in June, down 0.10 percentage point from the previous month. The rates kept falling from 3.24 percent in March to 3.17 percent in April and 3.16 percent in May. The June rate was the lowest in eight months.

Corporate loan rates by banks declined 0.14 percentage points from a month earlier to 3.41 percent in June. Lending rates for loans to big companies dipped 0.21 percentage points to 3.06 percent, with those for small firms sliding 0.07 percentage points to 3.64 percent. Endit