Household loans extended by South Korean financial firms grew at the lowest pace ever in August as the property market remained in the doldrums amid the economic slowdown, data showed Thursday.

Household lending extended by local banks and non-bank institutions totaled 649.8 trillion won ($597.2 billion) as of the end of August, up 4.1 percent from the previous year, according to the Bank of Korea.

The August growth rate marked the slowest gain since October 2003 when the central bank began to compile related data, it added.

The growth rate of home lending by such institutions slowed for the 12th straight month in August, indicating that the sluggishness in the property market remains.

South Korea is grappling with high household debt as households' high indebtedness is feared to crimp private spending, curbing economic growth.

Korea's household credit, including loans and credit purchases, stood at 922 trillion won as of end-June. Korea's ratio of household debt to disposable income reached 163 percent as of end-2011, staying among the highest-ranking group in the globe, according to the BOK.

But at the same time, policymakers are fretting over the slumping property market on concerns that mortgage delinquency may increase as the value of collateral is falling amid sliding housing prices.

Average transaction prices of houses in South Korea dropped 1.4 percent on-year in October while housing prices in Seoul fell 4.6 percent from a year earlier, a separate report showed.

South Korea did not undergo deleveraging unlike the U.S. and other nations during the 2008 global financial crisis.

Super-low interest rates and the long-held belief that property investment never fails led more Koreans to shoulder debt, but the prolonged economic downturn chilled the housing markets, raising fears that loan defaults may increase. (Yonhap News)