Banks' home-backed loans continue to grow in July

By Kim Soo-yeon
SEOUL, Aug. 10 (Yonhap) -- South Korean banks' home-backed loans continued to
grow by over 3 trillion won (US$2.45 billion) in July amid record-low borrowing
costs and rising housing prices, the central bank said Monday.

As of the end of July, outstanding bank mortgage loans amounted to 257.8 trillion
won, up 3.4 trillion won from a month earlier, the Bank of Korea (BOK) said.
Local banks' home-backed loans expanded by 3.5 trillion won in June, the fastest
growth in more than two years, as all-time record low borrowing costs raised
demand amid rising housing prices.
"Home-backed loans continued their fast growth in July as housing prices were on
the upward trend and lenders dealt with loan demands made before rules on
mortgage lending were strengthened," the central bank said in a statement.
The data comes as the financial regulator in early July toughened regulations on
bank mortgage lending by allowing lenders to extend such loans amounting to up to
50 percent of the value of a residence in Seoul and its adjacent areas, down from
60 percent.
Due to higher risks stemming from lending to smaller firms, Korean banks have
been scrambling to increase their mortgage lending this year, stoking worries
about an unusual surge in housing prices.
The BOK cut its key interest rate by a total of 3.25 percentage points to a
record low of 2 percent between October and February in a bid to bolster the
slowing economy. But all-time low borrowing costs contributed to raising
household demand for home-backed lending.
Meanwhile, bank loans to companies swung to the black in July as large companies
borrowed more after repaying loans in June to bolster their balance sheets, the
BOK said.
Local banks' corporate loans reached 507.5 trillion won last month, up 2.4
trillion won in June, it added. July's figures compared with a 1.6 trillion won
fall the previous month.
Lending to larger firms rose by 1.8 trillion won on-month to 79.6 trillion won
while loans to smaller companies rose by 500 billion won to 428 trillion won.
The data comes a day before the BOK makes its monthly interest-rate decision. The
central bank is widely forecast to freeze the benchmark seven-day repo rate for
the sixth straight month.
sooyeon@yna.co.kr
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