South Korean Banks' Home-Backed Lending Sees Largest Monthly Increase in Three Months

Strategic Insights -

South Korea's financial sector has experienced a significant surge in home-backed lending in October, with local banks' mortgage loans reaching 279 trillion won (US$247 billion) by the end of the month. This marks a 2.2 trillion won increase from the previous month, the largest monthly expansion since July. The growth is attributed to eased rules on mortgage loans and the country's economic recovery, which has spurred loan demand. The Bank of Korea (BOK) noted that the October reading accelerated from a 1.7 trillion won increase in September, marking the sharpest monthly expansion since a 2.24 trillion won gain in July.

Key Takeaways:

  • South Korean banks' mortgage loans reached an outstanding 279 trillion won (US$247 billion) as of the end of October, up 2.2 trillion won from the previous month.
  • The growth of banks' home-backed loans picked up in October, with the Bank of Korea (BOK) citing the impact of eased rules on mortgage loans.
  • Banks' household loans, including mortgage lending, grew by 2.7 trillion won on-month to 424.2 trillion won in October, marking the fastest monthly expansion in five months.
  • Corporate loans by local banks reached an outstanding 529 trillion won as of end-October, up 5.1 trillion won from the previous month, marking the sharpest growth since a 7 trillion won gain in January 2009.
  • The sharp expansion in bank loans lends support to prospects that the BOK will hike the key interest rate to 2.5% for November.
  • The country's consumer prices grew a whopping 4.1% in October from a year earlier, surpassing the upper range of 4% of the BOK's inflation target for 2010-2012.
  • The BOK raised the borrowing cost in July from an all-time low of 2% in response to inflation concerns.

Statistics:

  • 279 trillion won: outstanding mortgage loans by South Korean banks as of the end of October.
  • 2.2 trillion won: increase in mortgage loans from the previous month.
  • 424.2 trillion won: outstanding household loans, including mortgage lending, as of the end of October.
  • 5.1 trillion won: increase in corporate loans by local banks from the previous month.
  • 7 trillion won: largest gain in corporate loans in January 2009.
  • 4.1%: growth in the country's consumer prices in October from a year earlier.

Sources:

  • (Yonhap)
  • Asia Pulse