South Korean banks’ household loans rose for the seventh straight month in August on gains in home-backed lending, the central bank said Wednesday, fueling concerns over growing household debt.

Local banks’ household loans, including mortgage and credit loans, totaled 448 trillion won ($417.8 billion) as of the end of August, up 2.5 trillion won from the previous month, according to the Bank of Korea.

The August monthly growth quickened from a 2.3 trillion won on-month gain in July and marked the fastest growth since June, the BOK said.

But the growth of banks’ mortgage lending slowed last month from July, affected by the government’s steps to control home-backed lending.

Local banks’ mortgage loans grew 1.2 trillion won on-month to 298.6 trillion won as of end-August, slowing from a 1.9 trillion won expansion tallied in July.

The growth of credit loans accelerated last month as people took out more loans to pay off credit card bills and buy stocks, it added. Such lending grew 1.3 trillion won on-month to 148.5 trillion won.

The data came as South Korea is grappling with growing household debt, which amounted to 876.3 trillion won as of end-June.

In March, the government re-tightened previously eased rules on mortgage lending and it unveiled a set of measures to curb snowballing household debt in June by tightening banks’ loan-to-deposit ratios and mending banks’ lending practices.

Meanwhile, South Korean banks’ corporate lending also continued to grow as tightened lending standards for home loans led banks to increase corporate loans and large companies’ loan demand for operating funds rose, it added.

Corporate loans by local banks rose 3.1 trillion won on-month to 548.9 trillion won, slowing from a 5.9 trillion won advance, the BOK said.

Bank lending to large firms grew 3 trillion won on-month to 105.7 trillion won and lending to smaller firms rose a mere 149.2 billion won to 443.2 trillion won.

The data came one day before the BOK holds its monthly rate-review session. Analysts forecast that the BOK is likely to freeze the key interest rate at 3.25 percent for the third consecutive month on increased external economic uncertainty.

But high-flying inflation is unnerving BOK policymakers with consumer prices jumping 5.3 percent on-year in August. The bank raised the borrowing costs in January, March, June in a bid to stem inflation. 

(Yonhap News)