Loans to households by South Korean banks increased by 9.7 trillion won in July to 1040 trillion won, a record high and the largest monthly increase on record, according to data released by the Bank of Korea on Wednesday. this supports the view that the Bank of Korea has raised interest rates this year to curb the risk of a debt bubble.

Loans by South Korean banks to households exceeded 1000 trillion won for the first time in February as the Bank of Korea kept borrowing costs low and injected liquidity into markets hit by the epidemic. The debt-fuelled rise in property and other asset prices in South Korea has raised fears that this overheating could eventually turn into another crisis.

The South Korean government has tightened regulation and warned potential home buyers that the central bank may soon raise interest rates in an attempt to stem the buying boom in the property market.

The board of the Bank of Korea is also increasingly concerned that rising debt could exacerbate financial imbalances. Last month, a committee member called for an immediate increase in interest rates to contain the housing bubble, and most other committee members also expressed a degree of support.

Most economists now believe that the Bank of Korea will raise its benchmark interest rate by 25 basis points in the fourth quarter. Some expect the Bank of Korea to make a decision to raise interest rates at its meeting on Aug. 26 at the earliest.