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Banks' lending to households in South Korea posts lowest growth in 10 months

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Staff Writer | January 12, 2017
Banks' lending to households in South Korea posted the lowest growth in 10 months as borrowing costs advanced amid the expected U.S. rate hikes this year.
South Korea bank
Korean economy   Borrowing costs advanced
Outstanding loans extended by banks to households stood at 708 trillion won ($598 billion) as of end-December, up 3.5 trillion won from a month earlier, according to the Bank of Korea (BOK).

It was the lowest monthly expansion in 10 months since February 2016. From a year ago, the bank loans declined 5.3 trillion won.

Demand for home-backed loans slowed sharply on expectations that the U.S. Federal Reserve will raise its policy rate three times this year after lifting it by a quarter percentage point in December.

Market rates in South Korea turned upward to price in the expected U.S. rate hikes. Pressures would grow on the BOK to raise its benchmark rate as higher rates in the United States could trigger a foreign capital exodus in the financial market.

Mortgage loans owed by households to banks reached 533 trillion won as of end-December, up 3.6 trillion won from a month earlier. It almost halved from a 6.9 trillion-won increase tallied in December 2015.

The number of apartment transactions in capital Seoul was 9,000 in December, down from 11,000 in November.

For the whole year of 2016, banks' lending to households expanded 68.9 trillion won. It slowed from the record yearly increase of 78.2 trillion won tallied in 2015.