South Korea Q2 household credit growth fuelled by low interest rates

[SEOUL] South Korea's household credit grew at a brisk pace in the April-June period, central bank data showed on Thursday, as interest rates at record lows continued to encourage households to take out mortgages.

Household credit during the June quarter, which includes loans and other credit owned by South Korean households, was up 11.1 per cent on-year, or 125.7 trillion won (S$150 billion) , to a total of 1,257.3 trillion won, preliminary data from the Bank of Korea showed.

The pace of credit expansion slightly decelerated from 11.4 per cent growth in the first quarter of the year.

To address this sharp growth in household debt, the government will encourage households to take out amortised, fixed-rate loans instead of interest only ones, finance minister Yoo Il Ho said at a policy meeting in Seoul.

A separate release from the government said oversupply is a concern that threatens to destabilise household finances, which could put a dent in domestic demand.

Real estate transactions have increased at a swift pace over the course of two years after the central bank launched its current easing cycle as South Koreans take advantage of record-low interest rates. The current base rate is at 1.25 per cent.

REUTERS