Bank home loans fall in Sept. on tougher rules

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SEOUL, Oct. 8 (Yonhap) -- South Korean banks' home-backed loans declined for the
first time in more than two years in September, affected by stiffened regulations
on rising mortgage loans, the central bank said Thursday.
As of the end of September, outstanding bank home loans amounted to 260.1
trillion won (US$222.2 billion), down 418.4 billion won from a month earlier and
the first fall since May 2007, the Bank of Korea (BOK) said.
"Toughened rules on home-backed lending and rising lending rates contributed to a
decline in household lending," the central bank said.
It added that lenders sold a large portion of their mortgage loan assets to
state-run Korea Housing Finance Corp. When factored in, total home-backed lending
rose 2.4 trillion won last month, slowing from a 3.2 trillion won gain in August.
Household loans including mortgage lending fell by 1 trillion won on-month to
404.2 trillion won, the first decline since January 2009, it added.
Amid record-low borrowing costs and signs of an economic recovery, demand for
mortgage lending rose in expectation of further gains in housing prices.
South Korea's financial regulator in early July toughened regulations on bank
mortgage lending by allowing lenders to extend loans amounting to up to just 50
percent of the value of a residence in Seoul and its adjacent areas, down from 60
percent. In September, the watchdog further stiffened rules on home loans by
prompting banks to make loans based on borrowers' income.
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 help bolster the
slumping economy. But all-time low borrowing costs had contributed to rising
household demand for home-backed lending.
Meanwhile, banks' deposits expanded by the largest monthly amount in seven months
in September as local banks were scurrying to sell higher-yielding financial
products to secure funds.
Bank deposits amounted to 1,021.1 trillion won as of end-September, up 16.5
trillion won from the previous month and the biggest monthly increase since
February, the BOK said.
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 eighth straight month.
On Sept. 10, BOK Gov. Lee Seong-tae hinted that the bank may conduct a rate
increase if housing prices continue to rise.
sooyeon@yna.co.kr
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