South Korean banks to tighten household loan standard in Q1

SEOUL (Xinhua) – South Korean banks planned to tighten household loan standard in the first quarter amid the government’s efforts to curb speculative investment in the property market, central bank survey showed yesterday.

The household loan attitude index, which measures banks’ loan standard, came in at minus seven for the January-March quarter, staying below zero for the second consecutive quarter, according to the Bank of Korea (BOK).

The reading below zero means that banks plan to constrict household loan during the cited quarter.

The tighter loan standard came as the government unveiled a series of measures to control speculative investment in the real estate market.

Households rushed to buy new home with borrowed money amid the record-low borrowing cost. The central bank slashed its benchmark interest rate to a record low of 1.25 per cent in October last year, after lowering it from 1.75 per cent to 1.50 per cent in July.

The index for loan to small and mid-sized companies was 10 for the first quarter, up from three in the previous quarter. It indicated that banks plan to moderate loan standard for small firms.