Bank Of Korea Holds Rates Steady As Loan Growth Cools, Tariff Fears Loom

Household loans extended by five major banks in South Korea rose in the first 10 days of this month, but the pace of growth slowed sharply amid the government's stepped-up efforts to rein in household debt.

Outstanding household loans extended by the five major commercials banks here, including KB Kookmin Bank and Shinhan Bank, stood at 755.7 trillion won US$547.8 billion as of Thursday, up 891.2 billion won from the end of June, according to the data.

This translates to a daily increase of 89.1 billion won over the 10-day period in July, compared with a daily gain of 225.1 billion won recorded in June, reports Yonhap news agency.

If this trend continues through the end of the month, household loans are expected to increase by 2.76 trillion won in July, sharply less than a 6.75 trillion won increase in the previous month.

By category, outstanding home-backed loans rose 1.38 trillion won to 600.8 trillion won over the 10-day span.

In contrast, unsecured loans fell by 137.7 billion won, reversing a 1.09 trillion won gain in June.

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Industry officials attributed the slowdown to stronger debt control measures announced by financial authorities late last month to cool the overheated housing market in Seoul.

Under the new rules, mortgage lending for home purchases in the capital region will be capped at 600 million won.

Meanwhile, South Korea's central bank kept its benchmark interest rate unchanged, taking a cautious approach amid concerns about rapidly rising housing prices, growing household debt and uncertainties stemming from the United States' tariff policy.

In a widely expected decision, the Monetary Policy Board of the Bank of Korea (BOK) held its key rate steady at 2.5 percent during a rate-setting meeting in Seoul.

The move followed a rate cut in May, when the BOK lowered the policy rate by 25 basis points to support economic growth amid sluggish domestic demand and uncertainty stemming from the United States  sweeping tariff measures.

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