S Korean banks' home-backed loans hit slower growth rate

14:53, October 20, 2009      

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South Korean banks' home-backed loans rose at a slower rate in August as the financial watchdog tightened regulations on mortgage loans, the central bank said Tuesday.

According to the Bank of Korea (BOK), local banks' mortgage lending marked a growth of 2.8 trillion won, or 2.4 billion U.S. dollars, in August, slowing down in its pace compared to the previous two months.

Local banks saw home-backed loans increase by 3.5 trillion won (3.0 billion U.S. dollars) and 3.4 trillion won (2.9 billion U.S. dollars) in June and July, respectively.

The slowdown in August's home-backed loan growth came as the government tightened loan-to-value regulations, which in turn pulled down borrowing, the central bank explained.

In July, the financial watchdog toughened rules on home lending by allowing banks to extend such loans up to 50 percent of the value of a residence in Seoul and its adjacent areas, down from the previous 60 percent.

The watchdog further stiffened the restrictions by requiring banks to make loans based on borrowers' income.

The measure was part of the government's efforts to stabilize the nation's real asset market where the ample liquidity flowed into, causing a hike in price growth, on the back of the central bank's expansionary monetary policy.

The nation's central bank froze its key interest rate at a record-low of 2 percent for the eight straight month in October after conducting rate cuts amounting to 3.25 percentage points between October and February.

Source:Xinhua
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