S. Korean banks' loan rates climb in July

By Park Bo-ram

SEOUL, Aug. 27 (Yonhap) -- South Korean banks' lending rates gained ground for a third month in July as the government's loan regulation drove up mortgage rates, the central bank said Thursday.

The average bank rate on new loans to households and companies stood at 5.53
percent last month, up 0.06 percentage point from June, according to the Bank of
Korea (BOK).
The loan rate has been on the rise since May after hitting 5.4 percent in April,
the lowest since the central bank first compiled related data in 1996. Bank rates
had declined since October, when the BOK began its aggressive rate cutting by a
total of 3.25 percentage points to a record low of 2 percent through February to
spur a sagging economy.
"The growth in July lending rates came as local banks became more conservative in
their mortgage lending due to the government's tightened loan regulations," said
a BOK official.
With home prices spiking, the Financial Supervisory Service last month required
banks to extend mortgage loans equivalent to just 50 percent of the value of a
Seoul-area residence, down from 60 percent.
The average deposit rate, however, fell to 2.92 percent in July from 2.96 percent
the previous month, BOK said.
Meanwhile, South Korean lenders' loan-deposit spread hit a new ten-year high last
month. The gap reached 2.61 percentage points in July, compared with 2.51 points
the previous month. The July figure was the largest since 2.88 percent in May
1999, the central bank said.
pbr@yna.co.kr