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Banks’ lending rates log first rise in six months in July

Aug. 29, 2013 - 19:49 By Korea Herald
South Korean banks’ lending rates rose for the first time in six months in July, rebounding from a record low in the previous month, on an expiry of one-off tax breaks on home buying, the central bank said Thursday.

The banks’ average rates for new loans to households and firms stood at 4.6 percent in July, up 0.08 percentage points from a month earlier, according to the data compiled by the Bank of Korea .

The lending rates rose for the first time since January when they climbed by 0.16 percentage point on-month to 5 percent.

The BOK said that banks extended smaller home-backed loans last month after the government’s temporary tax break on home purchases came to an end in June.

In April, the government unveiled a set of measures to boost the slumping property market, including tax breaks for first-time homeowners and a cut in the supply of new homes.

Banks‘ lending rates had been on the decline amid the BOK’s accommodative policy stance. The central bank froze the key interest rate at 2.5 percent for the third straight month in August after making the first rate cut in seven months in May.

The average rates for fresh lending to households came in at 4.31 percent last month, up 0.2 percentage point from June, it said.

The average rate for bank deposits, meanwhile, declined to a fresh record low of 2.64 percent, down 0.02 percentage point from the previous month, it noted.

South Korean lenders‘ loan-deposit spread, a gauge of banks’ profitability from lending, reached 2.55 percentage points in July, down 0.05 percentage point from the previous month. (Yonhap News)