South Korea's household loans extended by financial institutions are expected to surpass the 1,000-trillion won (US$942.6 billion) mark this year, data showed Sunday, escalating concerns over the number of indebted households seeing meager income growth compared to rises in prices, especially rents.

Outstanding household loans by financial institutions including commercial lenders, insurers and financial agencies stood at 982.5 trillion won as of the end of the second quarter, according to the data from the Bank of Korea. As of end-August, household loans reached 993 trillion won.

If the trend keeps up, the country's household loans are widely expected to pass the 1,000-trillion won mark this year, market watchers said.

In its report recently submitted to the National Assembly, the central bank cited a soar in mortgages as the reason for increased household loans.

"Household lending by local banks was sharply up due to a rise in housing transactions in the second quarter and efforts to expand fixed-rate mortgages by the banks," the report said.

The government economic team led by Finance Minister Choi Kyung-hwan has been pushing ahead with stimulus focused on invigorating the local property market, which has been mired in a prolonged slump.

To that end, the government has eased regulations on the property market such as the loan-to-value ratio (LTV) and the debt-to-income ratio (DTI) aimed at curbing housing speculation.

Another factor in the increase in household loans is lower household income, according to observers.

"Due to the economic downturn, more people use mortgage loans to help out their income than to buy houses," said Lee Jun-hyup, a researcher at the Hyundai Research Institute, a local economic think tank.

South Koreans' real wages expanded at the slowest pace in more than two years in the second quarter, according to data from the central bank and the labor ministry.

The inflation-adjusted monthly wage per worker at companies that hire more than five people averaged 2.77 million won

(US$2,662) in the April-June period, inching up 0.2 percent from the previous year.

The on-year increase is the lowest since a 2.4 percent fall in the fourth quarter of 2011 and marks a fifth straight quarter of declining growth.

The sluggish growth comes as companies are cutting back on bonuses, according to the data. (Yonhap)