Disposable Income Decreasing
The National Assembly Budget Office announced on September 20 that South Korean households with at least two family members recorded a ratio of principal and interest repayment to disposable income of 24.3% last year. It added that the average annual disposable income of the households was 39.24 million won and their average principal and interest repayment was 9.52 million won. The ratio had been 18.3% in 2011 and 17.1% in 2012 but rose to 19.1% in 2013 and 21.7% in 2014.
The ratio soared from 11.7% to 23.8% between 2010 and last year when it comes to households headed by those aged 60 or older. It went up by 8.6 percentage points during the same period and reached 25.6% for those headed by people in their 40s. The ratios increased by 7.9 percentage points to 25% and by 5.7 percentage points to 23.6% for householders in their 30s and 50s, respectively. It decreased by 2.6 percentage points to 10.2% on the part of householders younger than 30.
By income bracket, the bottom 20% households’ repayment-to-disposable income ratio was 25.1%, 13.1 percentage points higher than in 2010. The second-lowest class recorded 27.9%, the highest among the five brackets. The ratios were 24.8%, 25.3% and 22.6% for households in the third-lowest, the second-highest and the highest income brackets, respectively.
Such a continuous increase in the ratio has to do with an increase in household debts led by mortgage debts amid low interest rates. The aged and low income earners, in particular, witnessed a rapid increase in liabilities while their income showed little growth due to the current economic recession.