Seoul: Household loans extended by South Korean banks grew at the slowest pace in six months in September due to tighter lending rules aimed at curbing surging housing prices and household debts, central bank data showed Thursday. Banks' outstanding household loans stood at 1,170.2 trillion won (US$825.07 billion) as of end-September, up 2 trillion won from a month earlier, according to the data from the Bank of Korea (BOK).

According to Yonhap News Agency, this growth marks a significant drop from a 4.1 trillion-won gain seen in the previous month and is the slowest growth recorded since March. Home-backed loans increased by 2.5 trillion won from a month earlier to 932.7 trillion won as of end-September, indicating a slowdown from a 3.9 trillion-won rise the previous month. Meanwhile, unsecured and other types of household loans fell by 500 billion won to 236.6 trillion won.

A BOK official stated, "The impact of lending regulations persisted, while seasonal factors also reduced demand for jeonse financing." Jeonse is a unique housing rental system in South Korea where tenants make a large lump-sum deposit to landlords instead of paying monthly rent. The official also mentioned that reduced credit loan limits contributed to the decline in other loans.

In efforts to control escalating housing prices, the government imposed a 600 million-won cap on mortgage loans for home purchases in the capital region and suspended home-backed lending to multiple homeowners in late June. Amid continued price increases, the government recently added 21 districts in Seoul to its list of speculative zones, subjecting all 25 districts in the capital to stricter regulations. The new rules further lower the mortgage loan cap to as low as 200 million won.

Apartment prices in Seoul have seen a sharp rise, particularly in neighborhoods around the Han River, spurring speculative demand and accelerating price trends. This situation has emerged as a significant policy challenge for the new government under President Lee Jae Myung.

In contrast, corporate loans increased by 5.3 trillion won from the previous month in September, which is a slowdown from an 8.4 trillion-won increase in the preceding month. As of end-September, outstanding corporate loans stood at 1,360.1 trillion won, according to the data.