S.Korea's bank loans continue to rise on record-low policy rate

Bank loans to households in South Korea continued to rise on the back of the record-low policy rate, central bank data showed on Wednesday.

Debts owed by households to banks totaled 713.9 trillion won (625.4 billion U.S. dollars) as of end-March, up 2.93 trillion won from a month earlier, according to the Bank of Korea (BOK).

The household debts increased almost 3 trillion won for the second consecutive month as the BOK kept its policy rate at an all-time low of 1.25 percent since June last year.

Market rates here picked up as the U.S. Federal Reserve raised its benchmark rate by a quarter percentage point last month, but the BOK has refrained from altering the rate citing a possible decoupling of economic conditions.

Mortgage loans extended by banks amounted to 538.5 trillion won at the end of March, up 2.6 trillion won from a month ago.

Household loans by non-bank deposit takers, including savings banks and credit unions, were 296.37 trillion won as of end-March, up 2.72 trillion won from a month earlier.

Households incapable of borrowing debts from banks moved to non-bank lenders, which demand higher lending rates. It increased worry about growing debt-servicing burden for households, weighing down on consumption. Enditem