Banks' home-backed loans grow in July

SEOUL, Sept. 13 (Yonhap) -- South Korean banks' home-backed loans grew by over 3
trillion won (US$2.45 billion) for a second month in July amid record-low
borrowing costs and rising housing prices, the central bank said Sunday.
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 low interest rates prompted more
people to take out bank loans amid prospects for an additional rise in home
prices.
"Mortgage lending increased in July mainly because lenders dealt with loan
demands made before rules on such loans were strengthened," the central bank said
in a statement.
As of end-July, outstanding household loans by commercial banks and non-banking
financial institutions reached 532.8 trillion won, up 4.4 trillion won from the
previous month, the BOK added.
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. Last week, the watchdog further stiffened rules on home loans by
prompting banks to make loans based on borrowers' income.
Amid growing hopes for an economic recovery, home-backed loans jumped in recent
months, sparking worries about an unusual gain in housing prices and possible
asset inflation.
After September's rate-setting meeting, BOK Gov. Lee Seong-tae strongly warned of
a sharp gain in mortgage lending, hinting that the bank would conduct a rate hike
if housing prices continue their upward trend.
The BOK froze its key interest rate at a record-low of 2 percent for the seventh
straight month in September after cutting it by a total of 3.25 percentage points
between October and February.
sooyeon@yna.co.kr
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