South Korea is set to unveil another set of measures this week, the third of its kind, aimed at curbing rising household debts amid expectations that the central bank would raise its key rate in the coming months, industry sources said Sunday.
The measures, due Tuesday, come as a rise in housing prices still does not show signs of abating despite a series of measures, including heightened financial regulations.
Over the past few years, housing prices in South Korea have continued to rise on the back of low interest rates.
Last month, home-backed loans increased 3.3 trillion won ($2.9 billion) to reach 561 trillion won, accelerating from a 3.1 trillion-won rise the previous month.
In August, the Moon Jae-in administration tightened regulations on home-backed loans as part of its efforts to curb snowballing household debts, which many cite as a key potential risk to Asia's fourth-largest economy.
In early September, the government announced a fresh set of regulations to cool down the overheated housing market, a month after adopting strong measures for Seoul and other cities.
Under the follow-up measure, the ministry tightened controls on two affluent districts -- Bundang, just south of Seoul, and Suseong-gu in the southeastern city of Daegu -- as their weekly housing prices rose an average of 0.3 percent in the fifth week of August. The ministry saw this rise as "abnormal."
Since taking office in May, President Moon has vowed to rein in the housing market as speculative forces have been blamed for driving up home prices amid rising concerns over snowballing household debt.
The fresh set of debt-controlling schemes also come at a time when the Bank of Korea is expected to shift into a tightening mode.
The central bank last week revised up its growth outlook for Asia's fourth-largest economy this year to 3 percent as it held its key rate steady for October.
During a press conference following the rate decision, BOK Gov. Lee Ju-yeol said the market conditions are "somewhat ripe" for the central bank to gradually tighten its monetary easing stance, hinting at a possible rate hike in the near future.
South Korea's overall household debt came to 1,388.3 trillion won ($1.22 trillion) as of end-June, up 10.4 percent from a year earlier, according to data compiled by the BOK.
According to the sources, the benchmark rate for home mortgage loans hit a nine-month high of 1.52 percent last month, which means the rates for home-backed loans will rise down the road.
A 1 percentage-point hike in the central bank's key rate usually leads to a rise of up to 3 percentage points in lending rates, according to the Hyundai Research Institute.
Previous data compiled by the central bank show that a 0.5 percentage-point hike in the lending rate is estimated to jack up financially vulnerable households' debt by 4.7 trillion won. (Yonhap)