Household loans up 11.8% in September

Household loans extended by local banks rose 11.8 percent in September from a year earlier due to an increase in collective loans, central bank data showed Wednesday.

Outstanding household loans from local lenders came to 688.4 trillion won ($613 billion) as of end-September, compared with 615.7 trillion won from a year earlier, according to the data from the Bank of Korea.

Compared with August this year, the amount rose by 6.1 trillion won. The on-month increase marked a decline from an 8.6 trillion-won gain in the previous month.

"Mortgages increased 5.3 trillion won from the previous month in September due to a rise in demand for collective loans," the BOK said. Collective loans are often associated with the reconstruction of old apartments.

In August, the government said it will control the supply of new apartments in a bid to curb demand for mortgage loans, the main culprit for soaring household debt in Asia's fourth-largest economy. Economists fear soaring household debt could dampen consumer spending.

Earlier this week, Yim Jong-yong, chairman of the Financial Services Commission, also vowed to tighten the oversight of local banks and other lenders to curb household debt.

Mortgages rolled out by six major local lenders -- KB Kookmin Bank, Shinhan Bank, Woori Bank, KEB Hana Bank, NH Bank and Industrial Bank of Korea -- increased by 742 billion won in the first five business days of this month, down 42 percent from a year earlier, according to data compiled by the banks.

The BOK slashed the key rate to a record low of 1.25 percent in June in a bid to help revitalize the economy. Analysts said they expect the BOK to hold the key rate steady at a record low 1.25 percent for October.

In September, local lenders' outstanding corporate loans came to 752.7 trillion won, gaining 1.8 trillion won from the previous month. (Yonhap)