Household loans extended by South Korean financial institutions continued to balloon in February, with the pace of their growth also accelerating from a month earlier amid a low-rate trend, central bank data showed Tuesday.
Outstanding household lending by local lenders and non-banking institutions reached 750.3 trillion won ($688.3 billion) in February, gaining 3.8 trillion won from a month earlier, according to the Bank of Korea. The February gain is the biggest for the month since the BOK started compiling the data in October 2003.
The on-month gain marks a sharp surge from the previous month when household loan growth increased by a relatively small 671 billion won due mainly to seasonal factors.
By sector, banks’ household loans increased by 3.4 trillion won on-month to 523.4 trillion won while those by non-banking institutions rose 384.3 billion won to 226.8 trillion won.
Of the total, mortgage loans extended by all financial institutions went up 3.8 trillion won to 465.8 trillion won, its monthly gain nearly tripling from 1.4 trillion won in January.
Loans for other purposes, such as living expenses, stayed unchanged at 284.4 trillion won.
“It seems that loans for other purposes stayed on par as borrowers tend to refrain from getting loans in the beginning of the year,” said a BOK official.
Demand for household loans has been trending higher as home buyers cash in on low lending rates that have been sliding lower in tandem with the BOK’s three rate cuts, in August, October and March, since the second half of last year.
In October, the amount jumped by a record 7.8 trillion won following the second in a series of three rate cuts that was aimed at bolstering growth.
The data comes two days ahead of the central bank’s monthly rate-setting meeting. Nineteen out of the 20 analysts and economists surveyed by Yonhap Infomax, the financial news arm of Yonhap News Agency, projected the BOK to stand pat on the record-low 1.75 percent base rate following a surprise rate cut last month.
Some analysts said growing household debt may block the central bank from further cutting the key rate.
“High household debt is a factor that will make the BOK wary of aggressive policy loosening,” said Krystal Tan of Capital Economics, a London-based macroeconomic research firm. Tan was among the majority that predicted a rate freeze. (Yonhap)
