The two key interest rate cuts by the central bank this year have fueled mortgage growth amid the record-low loan rates, data showed Wednesday.

The Bank of Korea lowered the nation’s base rate to 1.75 percent on March 12 and further to 1.5 percent on June 11.

Following the June rate-cut, housing-collateralized loans to the household sector increased by about 7 trillion won ($5.8 billion) in July, compared to the previous month, BOK data showed.

The monthly mortgage growth from June to July was the second highest ever, as a large number of households took low-rate loans -- issued mostly by commercial banks -- to buy apartments.

An all-time high growth in mortgages was seen in April, a month after the first rate-cut, surging by 7.8 trillion won on-month.

While the key rate was 2.5 percent in July 2014, monetary policymakers eased the rate by 1 percentage point in a year -- including two cuts in the second half of last year.

The Finance Ministry welcomed the BOK’s continuous dovish stance, reiterating the urgent need to invigorate the economy -- involving the real estate sector -- as private consumption and exports have remained in doldrums.

Critics, however, are questioning whether the current rate level is appropriate. They point out that the level has even sunk below the 2 percent rate of February 2009, when the global financial crisis had hit the nation.

In July, the 7-trillion won growth in mortgages accounted for 74 percent of the total growth of household loans, which involve credit-based lending and increased by 9.5 trillion won between June 30 and July 31.

BOK data showed that the collective outstanding loans, issued by first-tier banks and secondary lenders, reached 763.3 trillion won in July. The growth is estimated to have further pushed up Korea’s total household debt, which has surpassed 1.13 quadrillion won as a record-high.

The number of housing transactions came to 110,675 in July, up 43.2 percent the corresponding month of last year, according to the Ministry of Land, Infrastructure and Transportation.

During the January-July period this year, the number of cumulative housing deals posted 721,471, a 31 percent growth over the same period last year.

The BOK’s next rate-setting committee meeting is to be held on Sept. 11. 

    By Kim Yon-se (kys@heraldcorp.com)