Bank loans to households fall in July amid rising borrowing costs

SEOUL, Aug. 10 (Yonhap) — Household loans from banks in South Korea fell for the first time in four months in July, largely because people took out fewer loans amid rising interest rates. rapidly rising interest rates, according to central bank data on Wednesday.

Outstanding household loans from banks stood at 1,060.5 trillion won ($810.1 billion) at the end of July, down 300 billion won from the previous month, data showed. the Bank of Korea (BOK).

The BOK said unsecured and other non-mortgage loans fell at a faster rate than a month earlier despite continued mortgage growth.

The decline came as borrowing costs rose alongside central bank monetary tightening aimed at tackling inflation.

In July, the BOK raised its policy rate by 0.5 percentage points to 2.25%, the biggest and the sixth increase since August last year.

At the end of June, unsecured loans and other non-mortgage loans from banks fell from 2.2 trillion won to 268.2 trillion won last month, mainly due to higher lending rates. The monthly decline accelerated after a drop of 1.2 trillion won in June.

Loans guaranteed by banks rose by 2 trillion won in one month to reach 791 trillion won at the end of July. The monthly rise accelerated from a monthly increase of 1.4 trillion won in June.

Meanwhile, banks’ business loans grew at the fastest pace on record for the month of July since the bank began tracking related data in 2009.

Their corporate loans stood at 1.137.4 trillion won at the end of July, up 12.2 trillion won from the previous month, according to BOK data. The pace doubled from a growth of 6 trillion won a month ago.

The BOK attributed the increase to strong business demand for COVID-19 support and investment funds, as well as increased efforts by banks for business lending.

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