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Bank loan rates in S.Korea hit 22 month-high on expected Fed rate hikes

Xinhua, January 26, 2017 Adjust font size:

Rates for bank loans to households in South Korea rose to the highest in 22 months on expectations for the U.S. Federal Reserve's rate hikes this year, central bank data showed on Thursday.

Rates for household loans extended by deposit-taking banks were an annualized rate of 3.29 percent in December, up 0.09 percentage points from the previous month, according to the Bank of Korea (BOK).

It was the highest since February 2015, keeping an upward trend for four months in a row.

After raising the benchmark rate by a quarter percentage point last month, the Fed indicated three rate increases this year. It caused South Korean market rates to turn upward, raising debt-serving burden for households.

The BOK cut its policy rate from 3.25 percent in July 2014 to an all-time low of 1.25 percent in June last year. The record-low rate encouraged households to purchase new homes with borrowed money.

Mortgage loan rates averaged 3.13 percent in December, up 0.09 percentage points from the prior month. It was the fifth consecutive month of increase and the highest since February 2015.

Deposit rates inched down 0.01 percentage point over the month to 2.98 percent in December.

Lending rates for companies gained 0.09 percentage points to 3.54 percent, with rates for big companies adding 0.11 percentage points to 3.16 percent compared with the previous month.

Rates for loans to small enterprises rose 0.09 percentage points to 3.77 percent. Endit