South Korea Oct bank lending to households up most on record

[SEOUL] South Korea's bank lending to households in October rose by the biggest monthly amount in nearly seven years, led by mortgage borrowings, central bank data showed on Wednesday, a day before its monthly policy meeting.

Bank lending to households rose by a net 6.4 trillion won (US$5.82 billion) during October, the biggest monthly gain on record since data was compiled in January 2008 and far more than a 4.3 trillion won gain in September.

Mortgage lending grew by a net 5.5 trillion won in October, also the biggest rise on record and compared with a 4.1 trillion won gain in September, Bank of Korea data showed.

Bank lending to companies also jumped by a net 7.2 trillion won in October, the most since April this year and more than double a 3.5 trillion won gain in September, the data showed.

The data indicates stimulus measures by the government and the central bank, including plans to boost public spending and two interest rate cuts over the past three months, succeeded in encouraging consumers and companies to lift spending.

But the rapid rise in lending to households could weaken expectations for an additional interest rate cut in the near future as policymakers have cited already heavy household debt as a key risk to Asia's fourth-largest economy.

The Bank of Korea is widely expected to hold its benchmark interest rate unchanged at 2.0 per cent on Thursday, matching a record low, after two cuts in August and October, a Reuters survey found.

Meanwhile, separate data released at the same time by the central bank showed South Korea's broadest L-money supply measure in September rose 7.9 per cent from the year before, unchanged from a 7.9 per cent annual gain in August.

REUTERS