Household loan growth in South Korea slowed sharply last month due to weak demand for home-backed loans caused by the closure of tax benefits, central bank data showed Wednesday.
Loans extended by banks to households increased 2.8 trillion won (2.51 million U.S. dollars in July after jumping 5.8 trillion won in the prior month, according to the Bank of Korea (BOK).
Demand for mortgage loans weakened last month as the end of reduction for housing acquisition taxes led to the sluggishness in the housing market. Apartment transactions in Seoul fell to 1,800 in July from 9,000 in June.
Home-backed loans, including conforming loans, gained 2.7 trillion won in July after surging 4.9 trillion won in the previous month.
Conforming loans are those transferred by banks and other deposit takers to the state-run Korea Housing Finance Corp. (KHFC), which buys home-backed loans to securitize them as mortgage-backed securities (MBS).
Credit loans extended by banks increased 100 billion won in July after expanding 900 billion won in the previous month. The slower growth was attributable to companies' payment of summer vacation bonus.