Bank loans to S.Korean households keep sharp growth amid low rates

Bank loans to South Korean households kept a steep growth last month amid the record low interest rates, central bank data showed on Wednesday.

Debts owed by households to banks reached 688.4 trillion won (613.3 billion U.S. dollars) as of end-September, up 6.1 trillion won from the previous month, according to the Bank of Korea (BOK).

It was the second-highest increase measured in the month of September since the BOK began compiling the data in 2008. In September last year, the debts jumped 6.2 trillion won.

This year's September growth in household debts to banks almost quadrupled an average increase of 1.6 trillion won tallied in September for five years through 2014.

The sharp expansion came as the BOK cut its benchmark interest rate by 25 basis points in June to an all-time low of 1.25 percent. The bank began lowering the policy rate from 3.25 percent in July 2012.

The government encouraged banks to tighten standard on household loans from February this year, while unveiling a comprehensive package to reduce the supply of homes in August as part of efforts to cool down the overheating housing market.

However, household loan growth was led by an increase in mortgage loans, which jumped 5.3 trillion won from a month earlier to reach 517.9 trillion won as of end-September.

It was almost triple the average increase of 1.9 trillion won tallied in the month of September between 2010 and 2014.

Apartment transactions in capital Seoul last month reached 11,000 as demand for reconstructed homes in the central Gangnam district got strong.

Meanwhile, bank loans to companies stood at 752.7 trillion won as of end-September, up 1.8 trillion won from the prior month.

Loans to big corporations fell 0.3 trillion won over the month to 164 trillion won at the end of last month, but those to small companies grew 2.1 trillion won to 588.6 trillion won. Enditem