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Wednesday November 8, 4:36 PMS.Korea housing loans up, fuelling rate speculationSEOUL, Nov 8 (Reuters) - Home-backed loans to South Koreans rose at the fastest pace in five months in October from September, central bank data showed on Wednesday, adding to government worries about the red-hot housing market.Loans rose 1.32 percent in October from September, the biggest rise since 1.57 percent in May. The lending includes both mortgages to buy homes and shorter loans for other purposes but also secured on the borrower's home. The surge in such lending helped push overall bank loans to households up by 1.22 percent. The data comes amid speculation that rising home prices may persuade the central bank to raise interest rates soon, although no change is expected at its next policy meeting on Thursday. "The loan data itself did not have a huge impact on investors' sentiment today but clearly helped add to worries about the possibility of interest rate increases in the future," said Kong Dong-rak, a fixed-income analyst at SK Securities. December Treasury bond futures fell a sharp 16 ticks to finish at 108.72 because of such worries. Home-backed loans rose to 209.68 trillion won ($223.4 billion) at the end of October, equivalent to a quarter of the country's gross domestic product, from 206.94 trillion won a month before, the Bank of Korea data showed. The sharp rise pushed overall bank loans to households to an outstanding 335.01 trillion won by the end of October from 330.99 trillion won a month earlier, the biggest gain since a 1.37 percent rise in June. SURPRISE FEARED All 10 economists in a Reuters survey forecast the Bank of Korea would hold its overnight call rate target steady at 4.50 percent on Thursday, although there was no consensus about where rates would go after that. [ID:nSEO294379] But Kong at SK said the weaker treasury futures on Wednesday reflected growing worries among investors about a surprise increase in rates on Thursday. President Roh Moo-hyun vowed on Monday that his government would do whatever it could to calm the housing market and one of his aides visited the central bank later that day, sparking speculation that interest rates may rise soon. However, Kim Soo-hyun, Roh's secretary for social policy, told Reuters he had visited the Bank of Korea for personal reasons and had no discussion at all about interest rate policy, which by law is decided by the central bank's monetary policy committee alone. Separately, Roh called a gathering of ministers in charge of real estate policy, including Finance Minister Kwon O-kyu, to a meeting early on Thursday. [ID:nSEO132414] Housing prices in October were on average 13.6 percent higher than a year earlier, data from top local lender Kookmin Bank showed last week. That compares with October's consumer price inflation rate of 2.1 percent. The central bank has raised its overnight call rate target five times since October 2005 to rein in inflation and help calm the housing market, pushing the target to a five-year high of 4.50 percent by August. But after that fifth increase the central bank said it was ready to reconsider its monetary policy stance in view of slowing economic growth and low consumer price inflation. (Additional reporting by Lee Jin-joo) ($1=938.0 Won) |
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