Household loans extended by banks in South Korea rose for the 11th straight month in February, led by rising home-backed loans, central bank data showed Wednesday, amid worries that highly indebted households could pose a risk to Asia’s fourth-largest economy amid high borrowing costs.
Banks’ outstanding household loans came to 1,100.3 trillion won (US$838 billion) as of end-February, up 2 trillion won from a month earlier, according to the data from the Bank of Korea (BOK).
The February gain decelerated from a 3.3 trillion-won rise the previous month and marked an on-month increase for 11 months in a row, the data showed.
Banks’ home-backed loans rose 4.7 trillion won to 860 trillion won last month, decelerating from a 4.9 trillion-won on-month gain the previous month, while unsecured and other types of loans fell 2.7 trillion won to 239.1 trillion won over the cited period, according to the data.
Policymakers remained worried over a spike in household debts, which could sap further private spending.
B
orrowing costs in Asia’s fourth-largest economy remain high following the BOK’s aggressive monetary tightening aimed at bringing surging inflation under control.
Last month, South Korea’s central bank held its key interest rate steady at 3.5 percent amid a slowdown in growth and moderating inflation.
This marked the ninth straight time that the BOK has stood pat following rate freezes since February last year. The rate freezes came after the BOK delivered seven consecutive rate hikes from April 2022 to January 2023.
Banks’ loans to companies also rose 8 trillion won last month, following the previous month’s 6.7 trillion-won rise, the data showed.
Meanwhile, the financial regulator said household loans extended by all financial institutions, including banks, shrank 1.8 trillion won from a month earlier in February, marking the first on-month decline since March 2023.
Home-backed loans increased by 3.7 trillion won, while those extended by non-bank lenders, such as insurance firms and brokerages, shrank b
y 1 trillion won, according to the Financial Services Commission.
Non-mortgage loans dropped by 5.5 trillion won, accelerating from a 3.3 trillion-won decline in January.
Source: Yonhap News Agency