S. Korean banks hike rates amid soaring household debt

Major South Korean banks are set to increase lending rates this week, driven by concerns over a surge in household loans.

KB Bank, Shinhan Bank, and Hana Bank are expected to raise mortgage loan rates by between 0.1 and 0.3 percentage points, industry sources reported on Monday.

Despite tightened lending criteria, household loans continue to climb. The country’s top five lenders extended 4.18 trillion won ($3.12 billion) in primarily home-backed loans during the first 14 days of this month alone.

In July, household loans increased by 5.5 trillion won, marking the fourth consecutive month of growth.

Policymakers remain vigilant about the escalating household debt, which poses a risk to private consumption.

South Korea’s borrowing costs remain elevated following the Bank of Korea’s (BOK) aggressive rate hikes aimed at curbing inflation.

Last month, the BOK maintained its key interest rate at 3.5 percent for the twelfth consecutive meeting, balancing inflation concerns with the need to support economic growth.

The central bank is anticipated to hold steady again at its upcoming policy meeting.

Attribution: Yonhap News Agency

Subediting: M. S. Salama