Demand for bank loans expected to grow in Q3

SEOUL, July 6 (Yonhap) -- Demand for fresh loans in South Korea is likely to rise in the third quarter, central bank data showed Thursday.

The overall index measuring demand for bank loans of major lenders came to 11 for the July-September quarter, compared with 14 a quarter earlier, the Bank of Korea (BOK) said in a statement.

A reading above zero means bank lending will continue to increase, while a reading below the benchmark means demand will likely shrink.

The quarterly reading is based on a survey of 15 banks and 184 nonbank lenders between May 29 and June 15.

Demand for fresh loans from big firms is expected to grow in the July-September period, while the index gauging demand for small and medium-sized companies comes to 23 for the three-month period, compared with 17 for the previous quarter, it said.

Still, the BOK said demand for new mortgages is likely to fall in the third quarter due to a possible slowdown in home transactions and rising borrowing costs.

South Korea has tightened lending rules on homes in some designated speculative areas to curb real estate speculation.

Under the measures, the loan-to-value ratio in Seoul, Gyeonggi Province, some areas in Busan and the administrative capital of Sejong are lowered to 60 percent from 70 percent. The debt-to-income ratio in the areas is marked down to 50 percent from 60 percent.

South Korea's household debt stood at 1,359.7 trillion won (US$1.2 trillion) as of end-March, a dramatic increase from 665 trillion won at the end of 2007, according to the BOK.

Separately, indices measuring credit risks of large firms came to 10 for the July-September quarter, up from 7 in the previous quarter. Meanwhile, an index measuring credit risks of households came to 23 from 13 during the cited period.

entropy@yna.co.kr
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