Collective mortgage loans, considered as the main culprit behind the mounting household debt in South Korea, increased in August, despite the government’s new measures to curb the rising household debt.

The nation’s five major commercial banks including Shinhan, KB Kookmin, KEB Hana, Woori and NH Nonghyup announced on Monday that the collective loans as of the end of August amounted to 105.75 trillion won ($94.5 billion), up 0.88 percent from the previous month of 104.84 trillion won. The amount of the group loans, offered to a group of borrowers for middle payments for new apartment units, expanded 3.73 trillion won over the last four months since it exceeded 100 trillion in April.

Market experts believe that the recent rise is attributed to the increasing loans for middle payments for new homes put on the market in the first half of this year. In Korea, a constructor of a new apartment complex generally provides loans to would-be residents of the apartment’s units collectively without collateral for middle payments that account for a bulk of total cost.

The collective mortgage loans are expected to soar as about 168,900 units of newly-built apartments will be put up for sale in the market by the end of this year.

The government announced its comprehensive measures to keep the snowballing household debt in check on August 25, but the effect of the measures would start to be reflected in the first half of next year.

Some experts argue that the government should come up with additional solutions to curb the soaring household debt. The KB Financial Group Research Institute said on Monday that the August 25 measures are being somewhat counterproductive as the measure to reduce housing supplies in the market has further encouraged people to buy new homes amid fear of declining supplies and growing uncertainties in the housing market.

The outstanding home-backed loans including collective loans came to 353.12 trillion won in August, up 4.35 trillion won or 1.25 percent from July. The home-backed loans extended by more than 4 trillion even during the traditionally slow season for moving in July and August.

By Kim Hyo-sung and Park Yoon-ye

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