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| ▲ This file photo, taken July 18, 2023, shows information about a bank's loan programs in Seoul. (Yonhap) |
(2nd LD) household loans-October tally
(2nd LD) Banks' household loans up for 7th month in October amid high rates
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SEOUL, Nov. 8 (Yonhap) -- Household loans extended by banks in South Korea rose for the seventh straight month in October, led by rising home-backed loans amid high borrowing costs, central bank data showed Wednesday.
Banks' outstanding household loans had come to 1,086.6 trillion won (US$833.6 billion) as of end-October, up 6.8 trillion won from a month earlier, according to the data from the Bank of Korea (BOK).
The October gain accelerated from a 4.8 trillion-won rise the previous month and marks an on-month rise for the seventh month in a row, the data showed.
Banks' home-backed loans rose 5.8 trillion won to 839.6 trillion won last month, slowing from a 6.1 trillion won on-month gain the previous month, while unsecured and other types of loans rose 1 trillion won to 245.7 trillion won over the cited period, according to the data.
Borrowing costs in Asia's fourth-largest economy remain high following the BOK's aggressive monetary tightening aimed at bringing surging inflation under control.
Early this month, South Korea's central bank held its key interest rate steady at 3.5 percent for the sixth straight time amid a slowdown in growth and heightened uncertainties, such as the prolonged Ukraine-Russia war and rising household debts.
This marked the sixth straight time that the BOK has stood pat following rate freezes in February, April, May, July and August. The rate freezes came after the BOK delivered seven consecutive rate hikes from April 2022 to January 2023.
Last year, outstanding household loans slipped for the first time in 18 years amid higher rates.
Banks' loans to companies also continued to rise amid high demand.
Corporate loans extended by banks rose 8.1 trillion won last month, slowing from an 11.3 trillion won rise the previous month, a record for any September since the central bank began to compile related data on a monthly basis in June 2009, the data showed.
Meanwhile, the Financial Services Commission (FSC) said it will continue to monitor the growth of household loans due to concerns that household debts are putting pressure on the economy.
"The rise in overall household debt remained steep despite a slight drop in the growth rate of home-backed loans due to the increase in other household loans," the financial regulator said in a press release.
"The rise in the rate of increase in household loans in October was partly due to a low base effect contributing to a steeper rate of increase in non-mortgage loans, such as credit loans, but there still remains a need to continue monitoring the situation."
In a meeting held later with other related ministers, the FSC announced plans to temporarily forgive early termination fees on household loans as part of efforts to rein in household debt.
It will also seek to expand the application of the debt service ratio (DSR) and introduce a new formula for floating rate stress DSR before the end of next month, according to the FSC.
The DSR measures how much a borrower has to pay for principal and interest in proportion to his or her yearly income, which serves as a ceiling on aggregate lending.
The DSR currently is at 40 percent, meaning the principal and interest payments of any borrower cannot exceed 40 percent of their annual income.
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