SEOUL: Mortgage loans extended by major South Korean banks continued to increase in July on the back of a recovery in the local housing market and a low rate trend, industry data showed Monday.
The outstanding mortgage lending by seven commercial banks, including Kookmin Bank and Shinhan Bank, reached a combined 321.57 trillion won (US$275.67 billion) at the end of July, up 527 billion won from the 321.44 trillion won a month earlier, according to the data.
The banks also sold 2.84 trillion won worth of asset-backed securities last month to fund the government-backed loan scheme to help borrowers convert their floating-rate non-amortized loans into fixed-rate amortized ones.
As a result, there was a record 3.37 trillion won increase in home-backed loans, compared with a 2.53 trillion won jump the previous year, when the government eased mortgage regulations to boost the local economy. In South Korea, July is traditionally considered a summertime low season in the housing market.
Market watchers attributed the rise in household loans to the local property market showing apparent signs of recovery supported by the government-led deregulation drive and low borrowing costs. Apartment transactions in Seoul surged 88.7 percent on-year to 11,634 in July, topping the 10,000 threshold for the first time since 2006, according to separate industry data.
“Demand for houses stayed higher in July than it did in May and June,” said Lee Hwi-jung, a senior researcher at Hana Institute of Finance. She expected mortgage loans to keep rising until the financial authorities tighten household debt controls next year.
The Seoul government announced a set of measures to tackle the mounting household credits last month, saying it will encourage local lenders to extend fixed-rate amortized loans and further scrutinize borrowers’ repayment ability. The amount of the country’s household debt extended by banks and non-banking institutions reached a record high of 1,099 trillion won as of end-March.
