Korean banks’ household loans grew at the slowest pace in four months in July as the growth of mortgage lending eased amid a tepid property market, the central bank said Wednesday.

Local banks’ household loans, including home-backed and credit loans, amounted to 457.8 trillion won ($405.9 billion) as of the end of July, up 695.3 billion won from the previous month, according to the Bank of Korea.

The July growth contrasted with a 1.3 trillion won expansion in June and marked the slowest expansion since such lending fell by 413.9 billion won in March.

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 400 billion won on-month to 310.8 trillion won as of end-July, slowing from a 1.2 trillion won expansion in June, according to the BOK.

The anemic property market is undercutting the value of home-backed collateral, raising the number of borrowers under high pressure to repay part of maturing mortgage.

The financial regulator is moving to ease households’ repayment burdens by having banks convert maturing loans exceeding a lending limit or the loan-to-value ratio, into credit loans instead of collecting them.

But some experts claimed the move is not a fundamental solution, merely delaying the timing of repayment, as credit loans usually charge higher lending rates than mortgage loans.

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 the end of March.

The growth of South Korean banks’ corporate lending jumped in July compared with the previous month as companies borrowed again after repaying them to put their balance sheets in a good shape in June, the BOK said.

Corporate loans by local banks rose by 4.5 trillion won on-month to 586.5 trillion won, picking up from a 700 billion won gain in June, according to the central bank.

Bank lending to large firms grew 4 trillion won to 140.2 trillion won and lending to smaller firms gained 500 billion won to 446.3 trillion won.

The data came a day before the BOK holds its monthly rate-setting session. The BOK is widely expected to freeze the key rate at 3 percent following its surprise rate cut in July. But a handful of analysts are betting on a back-to-back rate cut this month, citing the weakening momentum of economic growth. (Yonhap News)