The pace of increase in mortgage loans visibly slowed in January, preliminary data from banks showed Sunday, but market watchers say it is too early to tell whether it speaks for a bigger trend that is here to stay.

Home-backed loans by six major commercial banks reached 300.99 trillion won ($274.68 billion) as of end-January, up 285.2 billion won from the end of the previous month. The pace of increase is in dramatic contrast with the fourth-quarter months when such loans jumped more than 3 trillion won each month.

Mortgage lending is being closely followed by policymakers as they gauge the soundness of the loans and whether its increase threatens the national economy. To bring back the local real estate market, the government last year aggressively eased home-related lending rules, which spiked up loans that market watchers say didn't all go into property transactions but also into living expenses.

The Bank of Korea figures showed outstanding home-backed loans extended by local banks reached 406.9 trillion won ($377.6 billion) as of the end of December, adding a record 6.2 trillion won from the previous month.

Watchers note that the fall in mortgage loans is probably due to seasonal factors, such as off-peak winter months when people usually do not change their residence. They also cite growing alarm at the pace of loans increase that forced local banks to raise their guard against lurking risks.

The government also took actions at the end of last year, announcing super-low interest home-collateralized loans in the 1 percent range and urged banks to offer more fixed-rate and amortized loans to make household lending healthier. Watchers say potential borrowers waited out in January on expectations for these loans that offer better terms.

But market analysts are divided on whether the fall in January will be sustained.

"More than 50 percent of mortgage loans are used for living costs, to fund businesses or to pay back loans," Kim Hyun-ah of the Construction and Economy Research Institute of Korea said. "Demand for the loans appears to have abated temporarily as workers were paid year-end bonuses," the researcher said.

Some say mortgage loans are bound to increase in the coming months as families start to relocate ahead of the new school year, while others say the effect of eased lending rules that had spiked up the loans is expiring.

"There doesn't seem to be an active switchover from home rentals to home purchases at present," Park Won-gap at Kookmin Bank said. "But with the spring moving season coming up in March, real estate transactions may pick up again, creating demand for mortgage loans." (Yonhap)