S. Korean banks set to lend more to households in Q3

(ATTN: ADDS more details about the index in para 4)
By Kim Soo-yeon
SEOUL, July 6 (Yonhap) -- South Korean banks are expected to ease their grip on
home-backed lending in the third quarter as record-low borrowing costs are
raising household demand, the central bank said Monday.

An index gauging lender attitudes to mortgage loans reached 13 for the
July-September period, compared with 9 for the second quarter, according to a
survey of 16 lenders by the Bank of Korea (BOK).
The index figure, compiled on the basis of banks' assessment of economic
conditions and other factors such as interest rates, is the highest since the
first quarter of 2002, when it came in at 19, it added. The central bank began to
compile related data in the first quarter of 2002.
The lower the reading, the more likely that banks will tighten their restrictions
on lending. A reading above zero means that the number of banks that will ease
their grip on lending surpasses that of lenders planning to stiffen lending
criteria.
"All-time low interest rates and a rise in housing prices increased demand for
home-backed lending, prompting local banks to slightly expand such loans," said
Shin Sung-hwan, an official at the BOK.
The data comes as the country's financial watchdog warned against rising mortgage
lending, saying that it plans to strengthen its monitoring of home-backed loans
and toughen lending criteria if the housing market shows signs of jitters.
Amid higher credit risks of lending to smaller firms, local lenders have been
scrambling to increase their mortgage lending this year, stoking worries about an
unusual surge in housing prices.
The BOK added that because the survey was conducted before the regulator voiced
concerns about rising home-backed loans, the outcome might not take into account
the watchdog's possible restriction on such lending.
Local lenders also expected household credit risk to remain at a high level in
the third quarter as the slumping economy hampers their capacity to repay debt.
The index, which gauges the likelihood of borrowers not paying back debts,
reached 25 for the July-September quarter, reflecting no change from the second
quarter, the BOK added.
The index has stayed at 25 since the fourth quarter of last year, the highest
level since the fourth quarter of 2003 when the index came in at 32.
sooyeon@yna.co.kr
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