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Banks aim to cut household loan growth next year

Dec. 16, 2014 - 13:45 By KH디지털2

South Korean lenders are expected to lower their household loan targets for next year as growing household debt is feared to heighten credit risks, industry sources said Tuesday.
   
Nonghyup Bank, which saw household debt grow 6.9 percent in the first 11 months of the year, set its target for next year at 3.3 percent amid views that household debt growth will slow in 2015 amid a sagging property market and slowing economic growth.
   
Demand for household loans has been climbing in Asia's fourth-largest economy following relaxed ceilings on mortgage loans. The central bank's two rate cuts earlier this year have also prompted more households to borrow.
  

"Demand for mortgage loans seems to have increased briefly due to eased property market rules but the trend is unlikely to continue into next year," said an official at the lender.
   
"We are especially trying to rein in growth as 'abnormal demand' is on a rise recently," the official added. "Abnormal demand" refers to loans taken out for mortgages but used for living costs or business expenses.
  

An October report by the central bank showed that the portion of loans used for property purchases accounted for less than half of new mortgage loans in the January-August period, which means that more than half of the amount was used for other purposes.
   
Kookmin Bank, which also saw mortgage loan growth reach 9.3 percent in the cited period, expects the figure to fall to the high 5 percent range next year.
  

Other lenders are also setting lower growth targets, with Woori slashing its target to 5.7 to 5.9 percent from 12.5 percent.
   
Shinhan Bank, Hana Bank and the Industrial Bank of Korea have all set their targets at the 5 percent level.
   
"We have begun to manage household debt growth amid concerns a rapid growth may hurt banks' financial health," said an official at Hana Bank. (Yonhap)