Loans extended to households by local lenders and financial institutions grew at a faster pace in August, apparently due to a rise in demand for home mortgages, central bank data showed Tuesday.
Outstanding household loans by local banks and non-banking institutions reached 773.1 trillion won ($674.84 billion) as of end-August, up 9.8 trillion won from a month earlier, according to data from the Bank of Korea.
The August pace accelerated from July when outstanding household loans gained 3.3 trillion won on-month.
The rise was largely attributed to low borrowing rates, coupled with increased home purchases.
In August, the number of home transactions here spiked 23.2 percent on-year to 94,110, the highest figure for the month of August since the government began compiling such data in 2006, the land and transportation ministry said earlier.
Against such a backdrop, home-backed loans increased 6.7 trillion won to 474.3 trillion won in August while other types of household debt only gained 3.1 trillion won from the previous month, according to the BOK.
Household loans extended by local banks increased 7.8 trillion won on-month in August while outstanding household loans from non-banking financial institutions gained 2 trillion won.
In efforts to help bolster growth, the central bank has made four rate cuts in little over a year, sending its key interest rate to a record low of 1.5 percent.
Many economists and policymakers have voiced a need for an additional rate cut, citing the country’s dwindling exports and slow recovery in local spending.
Exports have dipped for nine consecutive months while many local businesses, especially small and medium-sized manufacturers, continue to suffer from the lingering fallout from the Middle East Respiratory Syndrome (MERS) outbreak in late May.
Many, however, believe the BOK will choose to stand firm on its policy rate at least for another month.
In a recent poll conducted by Yonhap Infomax, the financial news arm of Yonhap News Agency, 12 out of 15 economists surveyed projected the central bank will keep its policy rate unchanged at a record low of 1.5 percent for October.
BOK Gov. Lee Ju-yeol has also noted the country’s monetary policy may need to move in the opposite direction should the U.S. begin hiking its own policy rate as it has said.
The BOK’s monthly rate-setting meeting is scheduled for Thursday. (Yonhap)
