Banks' household loan growth picks up in Aug.

Korean banks' household loans grew at a faster pace in August than the previous month due to marginal gains in home-backed lending and a seasonal factor, the central bank said Wednesday.

Local banks' household loans, including home-backed and credit loans, amounted to 459.3 trillion won (US$407.8 billion) as of the end of August, up 1.5 trillion won from the previous month, according to the Bank of Korea (BOK).

The August growth accelerated from a 700 billion won gain tallied in July, when the monthly growth of such lending was the slowest in four months.

A BOK official said the August gain was affected by a seasonal factor, as more people took out loans to cover spending for summer vacations.

The growth of banks' mortgage lending picked up last month, but overall demand for home-backed lending to buy houses remained subdued amid an anemic property market.

South Korea's property market is in a slump as the economy is losing steam and more households are delaying buying homes on prospects that housing prices will fall further.

Banks' mortgage lending grew by 700 billion won on-month to 311.6 trillion won as of end-August, up from a 400 billion won expansion in July, the BOK said.

South Korea is struggling to put a lid on growing household debt as high indebtedness is feared to curb consumer spending, hurting economic growth. South Korea's household credit stood at 922 trillion won as of the end of June.

Meanwhile, the growth of banks' corporate lending slowed last month from July, the data showed.

Corporate loans by local banks rose by 3.7 trillion won on-month to 590.2 trillion won, slowing from a 4.5 trillion won expansion in July, the central bank added.

Bank lending to large firms grew 3 trillion won to 143.2 trillion won and lending to smaller firms gained 700 billion won to 447.1 trillion won.

The data came a day before the BOK holds its monthly rate-setting session. Analysts said the BOK is likely to cut the key rate by a quarter percentage point to 2.75 percent to prop up the weakening growth.

The central bank froze the key rate at 3 percent last month after making a surprise rate cut in July in a bid to cushion the impact of the eurozone debt crisis on the local economy. (Yonhap)