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Bank loans to S.Korean households sharply rise on low borrowing costs

Xinhua, November 10, 2016 Adjust font size:

Bank loans to households in South Korea maintained a steep growth last month as borrowing costs stayed low on the record-low policy rate, central bank data showed on Thursday.

Debts owed by households to commercial banks reached 695.7 trillion won (605.7 billion U.S. dollars) as of end-October, up 7.5 trillion won from a month earlier, according to the Bank of Korea (BOK).

It was the second-biggest increase measured in the month since the BOK began compiling the data in 2008. The fastest rise was a 9 trillion-won expansion in October last year.

The steep increase in household debts came as the BOK lowered its benchmark interest rate from 3.25 percent in July 2014 to an all-time low of 1.25 percent in June this year.

Mortgage loans jumped 5.5 trillion won over the month to 523.4 trillion won as of end-October, bolstering up worries about the bubble-forming in the real estate market.

The government announced a package of measures last week to contain the bubble-forming in the property market, but demand for new home purchases with borrowed money continued due to record-low borrowing costs and the eased regulations on mortgage financing.

The number of apartment transactions in the capital Seoul was 13,000 or so last month.

Record-breaking household debts are forecast to increase the debt-servicing burden and consequently curb the already-weakened private consumption further.

South Korean economy increased 0.7 percent in the July-September quarter from the previous quarter. Except for construction investment and fiscal spending, the economy shed 0.1 percent in the quarter, bolstering concerns about economic slowdown. Endit