Mortgages from banks up sharply

Mortgages from banks up sharply

Softened rules on lending sparks loan demand By Kang Seung-woo Korean bank’s mortgage lending increased by the largest amount in 16 months in November, as softened rules on mortgages and the economic recovery sparked demand, the central bank said Wednesday. In addition, banks’ household loans, including mortgage lending also grew month-on-month. According to the Bank of Korea (BOK), local banks’ mortgage loans stood at 281.9 trillion won ($247.79 billion) as of the end of November, up 2.9 trillion won from the previous month. It also said that the last month’s reading accelerated from a 2.2 trillion won increase in October and highlighted the steepest monthly gain since a 3.4 trillion won rise in July 2009. The home-backed lending declined by 300 billion won in August, but since then, it has posted a steady monthly increase, tallying a gain of 1.7 trillion won and 2.2 trillion won in September and October, respectively, ahead of 2.9 trillion won last month. Last year, the government tightened regulations for mortgage loans in a bid to ease a spike in home-backed lending, but as the local property market slumped, it decided in late August to temporarily ease mortgage lending and tax rules to bolster the housing market. The government temporarily eased the debt-to-income (DTI) rule, which restricts homebuyers' borrowing in proportion to their annual income to stimulate the sluggish property market “The growth of banks’ home-backed loans picked up last month, almost matching about 3 trillion won in loan growth before the rules were introduced last year,” a BOK official said. Household borrowing from banks also increased by 4.1 trillion won month-on-month to 428.32 trillion won in November and it marked the largest monthly expansion in six months. Analysts believe that the soaring loans will plague the government. “It will be troublesome to the government. The sharp growth of the loans signals that the administration needs to cope with regulations on lending,” Park Jae-ryong, a research fellow at Samsung Economic Research Institute (SERI), told The Korea Times. He also said that the government is required to come up with stricter rules. “The current DTI rule is scheduled to be up in March next year, so the government had better return to the former rule rather than extend it.” Meanwhile, the growth of local lenders’ corporate lending steeply dipped in November following the sharpest expansion in almost two years in October, the BOK said. Corporate loans topped 529.7 trillion won as of last month, up 669.5 billion won from the previous month. In October, the monthly climb came to 5.12 trillion won.

ksw@koreatimes.co.kr