South Korea’s household credit rose to near 900 trillion won ($789.5 billion) in the third quarter, but quarterly growth slowed on the regulator’s move to curb home debt, the central bank said Monday.

Household credit totaled a record 892.5 trillion won as of the end of September, up 16.2 trillion won from three months earlier, according to the Bank of Korea (BOK).

Third-quarter growth slowed from the 18.9 trillion won on-quarter expansion tallied in the second quarter, but the aggregate household credit hit a fresh record high last quarter on sustained lending growth.

Household credit refers to credit purchases and loans for households extended by financial institutions, including commercial lenders and mutual savings banks.

“The regulator’s steps to curb household debt made the growth pace of household credit slow last quarter,” Park Seung-hwan, head of the BOK’s monetary & financial statistic team, told reporters.

Park said, however, that the on-year growth of household credit has stayed at around 9 percent each quarter of this year and that trend may continue into the fourth quarter.

Household lending by banks and non-bank depositary institutions totaled 628.6 trillion won as of end-September, up 10.8 trillion won from three months earlier.

Household loans extended by financial firms including insurers and card firms expanded 4.2 trillion won on-quarter to 212.3 trillion won in the third quarter. The third-quarter growth accelerated from a 2.2 trillion won gain in the second quarter, an indication that Financial Services Commission regulations on bank home loans prompted more people to rely on non-bank institutions.

Credit purchases stood at 51.5 trillion won as of the end of September, up 1.3 trillion won in the second quarter as more people used credit cards during summer vacations. Third-quarter growth picked up from a 1.1 trillion won on-quarter gain in the April through June period.

South Korea is grappling with growing household debt as high indebtedness is feared to curb consumer spending, sapping economic growth.

In an attempt to put a lid on rising household indebtedness, the regulator unveiled a set of measures to stem such loans, but household debt has not showed signs of abating on the back of growth of non-bank household loans.

In August, several local banks halted the extension of household loans in a move seen as following the watchdog’s call to keep household lending quarterly growth at 0.6 percent.

Growing household debt is a major headache for policymakers with the BOK in a dilemma over slowing growth and lingering inflation pressure. The BOK can not raise borrowing costs nor cut them amid conflicting risks.

The BOK froze the key interest rate at 3.25 percent for the fifth straight month in November as downside risks from Europe’s sovereign debt strains outweighed persisting inflation concerns. 

(Yonhap News)