Bank lending to households increases at a slower pace in November amid tight credit rules

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A man walks past advertisements in Seoul promoting Standard Chartered Korea’s mortgage products on October 26. (Yonhap)

South Korean bank loans to households increased at a slower pace in November amid increased government control over real estate-backed loans and other loans, central bank data showed on Wednesday.

Bank of Korea data shows bank lending to households was 1,060.9 trillion won ($ 901.2 billion) at the end of November, up 3 trillion won from the month previous.

Growth for the month slowed from growth of 5.2 trillion won in October.

Among household loans, mortgages increased from 2.4 trillion won in one month in November to 776.9 billion won, which also slowed from an increase of 4.7 trillion won a month more early, according to the data.

Other types of loans, including credit-based unsecured loans, increased by 500 billion won in one month to 282.9 trillion won. The increase is the same as that recorded a month earlier.

South Korea has tightened its control over household debt growth, fearing that the surge in household borrowing could weigh on the economic recovery.

The central bank’s decision to raise its policy rate and the resulting increased borrowing costs for banks have also weighed on those looking to borrow.

In November, the BOK raised its key rate by a quarter of a percentage point to 1%, ending 20 months of the zero rate put in place to support the economy affected by the pandemic. It was the second rate hike since rising 0.25 percentage points in August.

Meanwhile, bank lending to businesses also grew at a slower pace in November, but growth trends have always remained strong due to strong demand for funds from small businesses to deal with the fallout from the pandemic.

Data showed that banks’ outstanding business loans stood at 1,068.4 trillion won at the end of November, up 91 trillion won from the previous month. Monthly growth was slightly lower than an increase of 10.3 trillion won in October. (Yonhap)


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