SEOUL: Demand for loans by households and small companies in South Korea is expected to trend higher in the third quarter on the back of low borrowing costs, a survey showed Wednesday.
The overall index measuring demand from households as well as small and large firms reached 26 for the July-September period, hitting the highest level since the first quarter of 2014, according to the survey of 16 local banks conducted by the Bank of Korea (BOK). It marks a slight increase from 24 for the second quarter.
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The rise was largely attributed to an expected increase in loan demand by households that are borrowing more from lenders as lending rates run low following four rounds of rate cuts.
Since August last year, the BOK has slashed the key policy rate by a total of 1 percentage point to a record low of 1.5 percent, with the latest rate cut taking place last month.
The survey showed that loan demand by smaller companies is expected to remain strong, while that from the property and leasing sectors is also likely to increase as home transactions are on the rise.
But demand by large companies was forecast to slip as they opt to float debts instead of borrowing from banks amid the low interest rates trend which has lowered their issuance costs.
Separate BOK data showed that companies’ net bond issuance reached 1.9 trillion won (US$1.7 billion) in May, more than doubling from 700 billion won in the previous month.
