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S. Korea's household debt growth slows on higher borrowing costs

Xinhua, February 9, 2017 Adjust font size:

Household debt growth in South Korea slowed in the first month of this year on higher borrowing costs caused by the U.S. Federal Reserve's rate hike in December, central bank data showed Thursday.

Household loans extended by banks reached 708.02 trillion won (618.68 billion U.S. dollars) as of end-January, up 0.06 trillion won from a month earlier, according to the Bank of Korea (BOK).

There was almost no change last month compared with a 3.42 trillion-won surge in household debts in December last year.

The Fed raised its benchmark rate by a quarter percentage point in December, heralding at least three rate hikes in 2017. It led to higher borrowing costs here, discouraging South Korean households from borrowing money to purchase new homes.

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 rate increases in the United States are expected to force the South Korean central bank to lift its policy rate with a certain time lag.

The South Korean government also induced banks to tighten lending standards as the already massive household debts rose at a fast clip.

Mortgage loans increased 801.5 billion won in January, marking the lowest monthly growth since March 2014.

The number of apartment transactions in capital Seoul declined to 5,000 in January from 9,000 in December.

Rates for home-backed loans by banks stood at an annualized rate of 3.13 percent in December from 2.8 percent in September. Endit