Seoul, Nov 9 (IANS): South Korea's Central Bank on Thursday forecast that the rising pace of household debts, which kept a record-breaking trend and weighed down on private consumption, would slow down due to government measures to tighten loans standards and control speculative investment in property.

According to the Bank of Korea (BOK) monetary policy report submitted to the National Assembly, the growth of household loans extended by financial institutions was predicted to be slow after the August 2 and October 24 real estate and household debt measures, reports Xinhua news agency.

The government under President Moon Jae-in announced a set of measures to control the speculative investment in the property market, where households rushed to purchase new homes amid the record-low borrowing costs.

It also planned to tighten standard for household loans to prevent multiple homeowners from purchasing additional homes with borrowed money.

The BOK froze its benchmark interest rate at a record low of 1.25 per cent since June 2016. The rate continued to be lowered from 3.25 per cent in July 2012.

Under the previous conservative governments for nine years, household debts nearly doubled as people rushed to buy new homes with borrowed money amid eased mortgage regulations and low borrowing costs.

The rapid increase in household debts was a headache for the South Korean economy as it weighed down on private expenditure. The debt-servicing burden was forecast to grow amid rising expectations for rate hike from 2017-end or early next year.

The BOK report added that home price hike and housing transactions have slowed recently following the announcement of the government measures, expecting the weakening of demand for new homes amid soft expectations for home price hike.