South Korea’s household debt extended by local banks surged at a rapid pace in October, gaining more than 10 trillion won ($9 billion) on-month, central bank data showed Wednesday, despite government vows to put a brake on the momentum.

Outstanding bank loans extended to local households gained 10.6 trillion won on-month to 968.4 trillion won as of end-October, propelled by home-backed lending, according to the Bank of Korea. The gain is the highest for an October reading since the BOK started compiling related data in 2004 and slightly lower than the corresponding figure of 11.7 trillion won in August, when it hit an all-time high.

According to a BOK official, the gain is attributed to a growth in demand for “jeonse” loans. Jeonse is a system unique to Korea, which allows tenants to pay a large lump sum to live in a property for a minimum of two years. At the end of the term, the money is returned to them without interest.

The gain has been apparently prompted by a steep rise in the average price for the jeonse, driven by the Moon Jae-in administration’s housing rules that set a maximum rent hike of 5 percent and allow the extension of a jeonse contract for four years. The average price of a jeonse in Seoul gained 7.5 percent to 536.7 million won in October, compared to 510 million won in August, KB Kookmin Bank’s real estate services platform Liiv On showed earlier this month.

“South Korean households have been borrowing more jeonse-related loans,” said Yoon Ok-ja, an economist at the BOK’s financial market affairs team.

“When the jeonse prices are overall rising, there is usually an increase in demand for related loans, even when the overall transactions drop,” she added.

Banks’ mortgage loans increased by 6.8 trillion won on-month to 709.3 trillion won in October, compared to a 6.7 trillion-won gain the previous month. The gain marks the largest for an October reading since 2015 when the corresponding figure stood at 6.9 trillion won.

Growth in household debt has continued to gain momentum, threatening to pose a hurdle for the nation’s economic growth, despite government and the lenders’ vows to implement tighter measures to curb the figure.

According to Finance Minister and Deputy Prime Minister Hong Nam-ki on Monday, South Korea is mulling tightening rules on overdrafts. People have heavily relied on overdrafting in recent months to meet demand for property-related costs and stock investments, as the government tightened rules on mortgage lending in an attempt to cool down the heated housing market.

Meanwhile, nonmortgage loans increased by 3.8 trillion won last month, compared to a 3 trillion-won increase the previous month. Unsecured loans were popular in October, as households flocked to the stock market to subscribe to a lucrative pipeline of initial public offerings, including the creator of K-pop phenomenon BTS, Big Hit Entertainment’s market debut.

By Jung Min-kyung (mkjung@heraldcorp.com)