S.Korea Q1 household credit growth accelerates, fastest since late 2006

SEOUL May 26 South Korea’s household credit in
the March quarter rose at the fastest annual pace in nearly nine
years, central bank data showed on Wednesday, accelerating for a
seventh straight quarter as easy monetary policy has kept
borrowing rates at a record low.

Household credit during the first quarter of this year,
including loans and other debt owed by South Korean households
jumped 11.4 percent compared to a year ago from 1,098.3 trillion
won ($931.95 billion) to a total of 1,223.7 trillion won,
preliminary Bank of Korea data showed.

This sped up from a revised 10.6 percent growth on-year seen
in the fourth quarter of last year and was the fastest growth
since a 11.8 percent rise in the fourth quarter of 2006.

In monthly terms, household credit inched up 1.7 percent in
the first quarter.

Similar to the previous quarter, household loans were mainly
to blame for the sharp increase as they jumped 11.5 percent to
1,158.5 trillion won in the January-March period from a year
earlier.

The household credit data from the first quarter showed the
bulk of the debt was incurred for housing. Many South Koreans
have opted to borrow more for homes as the Bank of Korea lowered
its policy rate four times between August 2014 and June last
year to the current 1.50 percent.

Both the Bank of Korea and finance ministry have been
adamant that household debt is not likely to pose risks to the
financial system anytime soon, but authorities have been
monitoring the situation closely.

Meanwhile, the same data showed the outstanding amount of
purchases on credit rose 10.5 percent on-year in the first
quarter, accelerating from a 8.1 percent growth in the fourth
quarter of last year.

The first quarter credit growth rate matched the expansion
seen in the third quarter of last year, supporting policymakers’
comments that consumption has been recovering steadily.

($1 = 1,178.5000 won)

(Reporting by Christine Kim; Editing by Eric Meijer)

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Source URL:http://www.reuters.com/article/southkorea-economy-credit-idUSL3N18N067

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