Korean banks' property-backed loans rose this year as relatively lax lending criteria and tighter rules on home lending prompted local lenders to rely on such loans, the central bank said Monday.
Property-backed loans extended by the country's six banks reached 196.8 trillion won ($173.3 billion) as of end-May, up 4.9 percent from the end of last year, according to the Bank of Korea (BOK).
Self-employed people, smaller firms and households take out such loans with commercial properties as collateral. Lending to borrowers except households is classified as corporate loans.
The BOK said that a rise in such loans came as more baby boomers are setting up their own businesses after retirement and banks are trying to rely on more corporate lending due to tightened rules on household loans.
An increase in such loans is widely seen as worrisome as the slowing economy and sluggish property prices are feared to undercut borrowers' capacity to repay debt, it added.
The central bank said that the growth of such lending largely hovered above the growth of banks' mortgage lending, raising delinquency rates and spawning concerns that such loans may turn sour amid the slowing economy.
The growth of banks' commercial property-backed lending expanded 11.9 percent in 2011, compared with an 8.4 percent on-year growth of mortgage loans, it said.
The delinquency rate of property-backed loans stood at 1.44 percent as of end-May, higher than the 0.93 percent for that of home-backed lending.
Banks' mortgage loans reached 223.8 trillion won as of the end of May, accounting for 27.2 percent of banks' won-denominated loans, according to the BOK. (Yonhap)