S. Korea's household credit hits new high in Q2

SEOUL, Aug. 22 (Yonhap) -- South Korea's household credit rose to a new high in the second quarter as consumers borrowed more from lenders and increased credit card purchases on seasonal factors, the central bank said Monday. As of the end of June, outstanding household credit stood at 876.3 trillion won (US$807.5 billion), up 18.9 trillion won from three months earlier, according to the Bank of Korea (BOK). The second-quarter reading accelerated from a 10.4 trillion won expansion registered in the first quarter of the year, when South Korea's household credit exceeded the 800 trillion won mark for the first time. Household credit refers to credit purchases and loans for households extended by financial institutions, including commercial lenders and mutual savings banks. "The growth came mostly due to increased borrowing at banks, as consumers turned to purchase more in May, which includes many holidays for families," a BOK official said. "Increased home-backed lendings at non-bank institutions also drove up the figure," the official said. Household lending by local financial institutions reached 826 trillion won as of end-June, up 17.8 trillion won from three months earlier, according to the BOK. In the second quarter, banks' home-backed lending, which accounts for a majority of banks' loans, grew by 5.4 trillion won on-quarter to 295.3 trillion won. The growth pace remained consistent with the increase registered in the first quarter. Credit purchases stood at 50.3 trillion won as of end-June, up 1.1 trillion won from the preceding quarter, as more consumers beefed up spending on their credit cards, the BOK said. The data came as the BOK froze the key interest rate at 3.25 percent for the second consecutive month in August due to economic uncertainty. Households' mounting debt has been a persistent headache for policymakers because their capacity to service debt will be dented as interest rates rise. The central bank has raised borrowing costs five times from a record low of 2 percent since last July in an effort to normalize its loose monetary policy stance and tame inflation.