Household debts keep rising on rate cut, housing trade

South Korea's household debt shows no signs of abating despite efforts to tackle the potential risk factor for the local economy, central bank data showed Wednesday.

The balance of household loans extended by local banks amounted to 673.7 trillion won ($616 billion) as of the end of July, an increase of 6.3 trillion won from a month earlier, according to the Bank of Korea.

Of the aggregate debts, home-backed loans extended by banks rose by 5.8 trillion won to 506.6 trillion won.

"Household borrowing expanded due to an increase in the housing trade and a decline in interest rates," the BOK said.

It slashed the key rate to a record low of 1.25 percent in June in a bid to help revitalize the economy.

The number of home transactions in Seoul rose to 14,000 in July from 12,000 in June. It's unusual, given that summer is traditionally an off season here in the home trade.

Major banks in South Korea have tightened the screening of applications for mortgage loans. (Yonhap)