Korea’s household and corporate loans rose sharply in October against the previous month following the second policy rate cut.

According to data released by Financial Services Commission, Financial Supervisory Service, and Bank of Korea on Tuesday, household loans extended by local financial institutions stretched 8.1 trillion won in October. The addition was sharply up from previous month’s 3.2 trillion won gain but less than 10.4 trillion won recorded a year earlier.

Household borrowings from banks increased 7.2 trillion won in October, standing far above the average monthly gain of 4.65 trillion won for the January-October period this year. The sharp growth was largely due to extra financial needs to pay for house rentals and purchases whose value shot up around the capital, said a market expert. According to data by Korea Appraisal Board, apartment prices in Seoul rose 0.60 percent in October, accelerated from previous month’s 0.18 percent.

Mortgage-backed loans extended by banks rose 4.6 trillion won from a month earlier and marked the largest gain for the month of October since 2016. Those extended by second-tier financial institutions such as savings banks, however, decreased 700 billion won in October.

Other loans including credit-based personal loans increased 2.5 trillion won from the previous month at primary banks and 1.7 trillion won at second-tier lenders, as households sought alternatives to mortgage-backed loans under stricter lending requirements. Also, consumers upped their borrowings for their extra purchases for Chuseok holiday.

Corporate loans from banks gained 7.5 trillion won in October, sharply up from previous month’s 4.9 trillion won gain. Large companies added 1.1 trillion won in loans from banks, up from 100 trillion won addition marked in September. Bank loans to small and medium sized enterprises grew 6.3 trillion won, the fastest gain since April 2015. Of the SME loans, self-employed upped their borrowings by 2.8 trillion won, stretched from previous month’s 400 billion won.

Market experts said companies expanded borrowings to take advantage from the low-interest rate environment while their needs for extra cash rose ahead of tax season. Also, banks have been aggressive in selling loans to businesses in preparation for a change in the loan-deposit ratio rule. From next year, the weight of corporate loans will be reduced when calculating a lender’s loan-deposit ratio, which is used to assess its liquidity.

By Pulse

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