South Korean banks forecast demand for loans to decline in the first quarter from three months earlier in line with weakening demand for mortgage loans, a survey showed Monday.

An index forecasting demand for loans by small and medium enterprises, large corporations and households came in at 20, down from a projection of 24 for the fourth quarter last year, according to the survey of 16 local banks conducted by the Bank of Korea. It marks the lowest level since 20 in the second quarter of 2014.

The fall was largely attributed to a decline in demand for mortgage loans that came in at 22 for the first quarter, sharply down from 31 for the fourth quarter.

The index, which had lingered below the 30-mark for more than two years, jumped to 34 in the third quarter and 31 in the fourth quarter as a growing number of home buyers jumped on the policy bandwagon.

In an effort to boost growth and liven up the property market, the government eased the ceiling for the debt-to-income (DTI) ratio and loan-to-value (LTV) rules starting August, encouraging home buyers to borrow more. The central bank also took part by lowering the base rate two times, in August and October.

The polled lenders expected their lending attitude to slightly tighten in the first quarter as they focus on risk management.

The index forecasting their lending attitude came in at 6, down from 9 in the previous quarter, falling to the lowest level since the first quarter of last year.

Credit risks in companies and households were expected to remain high in the first quarter amid sluggish domestic demand and economic uncertainties.

The forecast came in at 23, inching up from 24 in the fourth quarter, according to the data. (Yonhap)