South Korean banks’ household loans grew at the fastest pace in six years in December as more people took out mortgage loans ahead of the end of the government’s temporary housing tax benefits, the central bank said Thursday.

Local banks’ household loans, including home-backed and credit loans, amounted to 466.5 trillion won ($439.4 billion) as of end-December, up 4.9 trillion won from the previous month, according to the Bank of Korea.

The December data compared with a 1.1 trillion won gain tallied in November and marked the largest monthly rise since a 5 trillion won advance in December 2006, it added.

In December, bank mortgage lending grew 5 trillion won on-month to 316.9 trillion won, the largest monthly gain since a 5.7 trillion won rise in September 2002.

If mortgage loans transferred to the state-run Korea Housing Finance Corp. are taken into account, the December household loans expanded by 5.6 trillion won, the largest monthly gain since 6.9 trillion won in November 2006.

The central bank said that banks’ household loans rose as more people scurried to take out home-backed lending to enjoy a temporary tax cut for home purchases before it ended on Dec. 31.

In September, the government unveiled a set of measures to boost the sagging property market, including tax cuts of housing purchases.

South Korea’s property market is in the doldrums as the local economy loses steam and more households are delaying buying homes on prospects housing prices will fall further.

Meanwhile, banks’ corporate lending declined last month as local firms repaid bank loans to make the balance sheet look better and lenders disposed of bad debts at the end-year, the BOK said.

Corporate loans by local banks fell 11.8 trillion won on-month to 589 trillion won, compared with a 2.4 trillion won on-month gain in November.

Banks’ lending to smaller firms declined 7.7 trillion won to 446.8 trillion won, after growing 1.7 trillion won in November, it added.

The data came one day before the BOK holds its monthly rate-setting session. Analysts said the BOK is likely to freeze the key interest rate at 2.75 percent for the third straight month in January, analysts say. (Yonhap News)