Skyrocketing Loans
The household loan balance showed a record-high growth rate to reach a new high in October. The low interest rate trend as of late and recent relaxation of the loan-to-value (LTV) and debt-to-income (DTI) ratios are accelerating the increase in mortgage loans and household debts.
The Bank of Korea announced on Dec. 9 that the balance of household loans provided by banking and non-banking depository institutions totaled 730.6 trillion won (US$660.4 billion) at the end of October, and increased by 7.8 trillion won (US$7.0 billion) from a month ago.
The month-on-month growth rate is the highest since 2003 and the total balance increased for nine consecutive months. The balance as of the end of October is 8.1 percent, or 54.6 trillion won (US$49.4 billion), greater than a year earlier.
The central bank cut the key rate in August and October, and the commercial interest rate is at a record-low level now. Banks, on their part, have increased their mortgage loan credit lines based on the relaxed regulations.