Banks' household loans surge in June

South Korean banks' household loans continued to grow in June as still-low borrowing costs and banks' efforts to expand lending spurred demand for home-backed loans, the central bank said Wednesday. Local banks' home loans, including home-backed lending, reached 443.2 trillion won (US$416.3 billion) as of the end of June, up 3.4 trillion won from the previous month, according to the Bank of Korea (BOK). The June total accelerated from a 3.3 trillion won on-month expansion registered in May and marked the largest monthly expansion since a 4.1 trillion won gain tallied in November 2010. The monthly growth of bank mortgage loans accelerated in June as local banks made efforts to expand their assets ahead of half-year performance assessments and low borrowing costs spurred loan demand, the central bank said. Banks' mortgage lending grew by 2.3 trillion won on-month to 295.4 trillion won as of the end of June, accelerating from a 1.4 trillion won expansion in May. The data came as the government unveiled a set of measures to curb snowballing household debt by tightening banks' loan-to-deposit ratios and mending banks' lending practices. Household debt surpassed the 800 trillion won mark on the back of a long streak of low rates and the economic recovery. Meanwhile, South Korean banks' corporate lending declined in June mainly as companies paid off their debt to clean their books before the end of June, the BOK said. Corporate loans by local banks reached an outstanding 539.3 trillion won as of end-June, down 3.7 trillion won from the previous month. Bank lending to large firms fell 2.3 trillion won on-month to 99.6 trillion won and lending to smaller companies declined 1.5 trillion won to 439.8 trillion won. The data came one day before the BOK holds its monthly rate-review meeting amid household debt concerns and lingering economic uncertainty. Analysts said the BOK is expected to freeze the key interest rate at 3.25 percent following a rate hike in June. The bank has raised the borrowing cost by a combined 1.25 percentage point five times since July last year in an effort to normalize the accommodative stance.