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Mortgage loans skyrocket on tax breaks for property transactions
2013.05.08 18:30:40 | 2013.05.08 18:37:13
Mortgage loans surged in South Korea on the government’s tax break measures to stimulate the real estate market announced on April 1.

[Mortgage loans skyrocket on tax breaks for property transactions] 기사의 본문 이미지

Domestic banks extended additional mortgage loans worth 3.20 trillion won ($2.95 billion) in April this year, said the Bank of Korea (BOK) Wednesday. The data counted Bogeumjari Loans offered by the Korea Housing-Finance Corporation and conforming loans extended by commercial banks. Bogeumjari Loan is a variation of a long-term mortgage loan common in advanced nations designed by the Korea Housing Finance Corporation to allow customers to repay the principal and interest of their loan over a period of 10 to 30 years.

The rising mortgage loans have also increased the nation’s total household loans extended by banks by 4.20 trillion won last month. This is the largest growth since 5.60 trillion won of last December, when the scheduled termination of tax deductions on property acquisition tax prompted people to take out mortgage loans before the end of 2012.

The BOK said the rise in mortgage loans is attributable to the tax breaks for first-time home buyers and subsequent increase in housing transactions.

Revolving loans that use bank accounts as a facility jumped 1.10 trillion won to 147 trillion won in April.

Corporate loans surged at an accelerated pace of 5.90 trillion won last month, up from three trillion won of the prior month. Conglomerates were granted new loans worth 4.10 trillion won, and small and medium-sized businesses (SMB) 1.90 trillion won.

Banks saw a notable decrease in certificates of deposits. Banks’ lending fell 11.50 trillion in April, and money market deposit accounts (MMDAs) lost 7.40 trillion won. The decrease stemmed from a seasonal cyclical factor, as April has deadlines for paying corporate tax and value-added tax, the central bank said. The certificates of deposits saw withdrawals of 1.10 trillion won.

Money market funds (MMF) of asset management firms lost a total of 10.10 trillion won last month. The MMF suffered the withdrawal because corporations paid taxes, while the short-term interest rate went up, according to the BOK. In contrast, bond funds ballooned by five trillion won in a monthly comparison, as they offered relatively higher yields and some new investment funds switched to bond funds.

[Written by Lee Duk-choo]


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