More policy efforts needed to stem rising housing prices: bank heads

SEOUL, Sept. 18 (Yonhap) -- More should be done to curb rising housing prices,
including building more homes, as loan regulations are likely to have a limited
impact, South Korean commercial bank chiefs said Friday.

The country's financial regulator in early July toughened regulations on mortgage
lending, restricting the amount of such loans to 50 percent of the value of a
residence in Seoul or its adjacent areas, down from 60 percent.
In August, the watchdog went a step further, allowing banks to make loans based
only on the borrower's income.
"Recent stiffened lending rules will likely have a limited impact on stabilizing
home prices," the Bank of Korea (BOK) said, relaying sentiments of the heads of
seven local banks as expressed in a monthly meeting with BOK Gov. Lee Seong-tae.
"More policy efforts are necessary such as an increase in the supply of houses to
stem expectations for gains in home prices."
The remarks follow repeated warnings by Lee of a sharp gain in home-backed
lending, which is sparking worries about an unusual gain in housing prices and
possible asset inflation.
At September's rate-setting meeting, Lee hinted the bank could raise its key
interest rate -- which has remained flat for seven straight months -- if housing
prices continue their upward trend.
Also Friday, the top central banker said a credit squeeze sparked by the global
financial meltdown has "significantly" eased as bank lending continues to grow.
Despite ample liquidity supply by the BOK, money had not fully flowed in the
financial system as banks were wary of expanding lending due to credit risks.
sooyeon@yna.co.kr
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