Korean banks’ household loans grew at a slower pace in June than the previous month due mainly to an absence of a one-off seasonal factor, the central bank said Wednesday.

Local banks’ household loans, including home-backed and credit loans, amounted to 457.1 trillion won ($399.1 billion) as of the end of June, up 1.3 trillion won from the previous month, according to the Bank of Korea.

The June growth eased from a 2.2 trillion won expansion in May when people took more loans to cover spending for holidays such as Parents’ Day.

The central bank said that despite sluggish housing transactions, banks’ mortgage loans grew in June at a similar pace to that seen in May as banks tried to expand loans to meet their half-year business targets.

Banks’ mortgage lending grew by 1.2 trillion won on-month to 310.4 trillion won as of the end of June. In May, home-backed loans expanded 1.3 trillion won.

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 911.4 trillion won as of March.

The growth of South Korean banks’ corporate lending also sharply eased in June as companies repaid loans to make their balance sheets look better at the end of the half-year, the BOK said.

Corporate loans by local banks rose by 687 billion won on-month to 582 trillion won, slowing from a 3.7 trillion won gain in May, according to the BOK.

Bank lending to large firms grew 921 billion won to 136.2 trillion won and lending to smaller firms declined 233.9 billion won to 445.8 trillion won.

The data came a day before the BOK holds its monthly rate-setting session. Most analysts expect the BOK will freeze the key interest rate at 3.25 percent for the 13th consecutive month.

However, some experts forecast the bank may cut the rate as part of efforts to join global policy coordination to fight the eurozone debt crisis. 

(Yonhap News)