Household loan growth hits 5-month high in May

SEOUL, July 9 (Yonhap) -- Household loans extended by South Korean financial institutions grew at the fastest pace in five months in May on the government's measures to revitalize the sluggish property market, the central bank said Tuesday.

Household lending handled by local banks and non-bank institutions totaled 659.9 trillion won (US$575.7 billion) as of end-May, up 3.4 trillion won from the previous month, according to the Bank of Korea (BOK).

The May data marked the largest monthly gain since December of last year when household lending grew by 6.76 trillion won.

Banks' home loans totaled 465.9 trillion won in May, up 2.6 trillion won from the previous month, the BOK added.

The rise in household lending came as housing transactions increased on the back of the government's steps to help boost the slumping property market.

In April, the government unveiled a set of measures to revitalize the property market including tax breaks for first-time homeowners and a cut in the supply of new homes.

Mortgage loans by banks and non-bank institutions grew 2 trillion won on-month to 401.9 trillion won. Banks' home-backed lending amounted to 316.6 trillion won in May, up 1.9 trillion won from the previous month.

The data came two days before BOK policymakers are to hold their monthly rate-setting session. Analysts said that the BOK is widely expected to freeze the key interest rate at 2.5 percent for the second straight month following its rate cut in May.

South Korean policymakers are struggling to curb the growing household debt as the private sector's high indebtedness is feared to crimp domestic demand, hurting economic growth. South Korea's household credit stood at 961.6 trillion won as of end-March.

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