South Korea’s household debt passed the milestone of 1,500 trillion won (US$1.33 trillion) for the first time in the third quarter this year.
Household debt still continues to grow faster than income but the growth pace has slowed down due to the government’s tighter loan regulation.
According to data released by the Bank of Korea (BOK) on Nov. 21, the country’s outstanding household credit reached 1,514.4 trillion won (US$1.34 trillion) as of the end of the third quarter, up 22 trillion won (US$19.47 billion) from the previous quarter.
It is the first time that the tally surpassed the 1,500 trillion won (US$1.33 trillion) mark since records began. Yet the growth pace slowed down a bit. The 22 trillion won increase in the third quarter was smaller than the 24.1 trillion won (US$21.33 billion) growth in the second quarter. The average amount of third quarter debt growth from 2015 to 2017 was 30.5 trillion won (US$26.99 billion).
Meanwhile, the total amount of on-year increase in household credit also stood at 95.1 trillion won (US$84.16 billion), falling below 100 trillion won (US$88.5 billion). Household credit rose 6.7 percent in the third quarter from a year ago, the lowest since 6.5 percent growth in the fourth quarter of 2014. However, the on-year growth rate still remained higher than 4.2 percent growth in the country’s monthly average nominal household income in the second quarter this year. Household credit is a combination of borrowings from financial institutions such as banks, insurers, savings banks, and private lenders, and credit card spending.
By sector, household loan of deposit banks gained 14.2 trillion won (US$12.57 billion) from the previous quarter, showing a higher increase than that of 12.8 trillion won (US$11.33 billion) in the previous quarter. This was largely due to growth in group loans to purchase an apartment house and loans for rental fees. The growth in household loan from non-banking financial companies slowed down as the government tightened related regulations, including the introduction of debt service ratio (DSR) designed to control home-backed mortgage loans. An official from the BOK said, “The growth pace of household credit is still faster than that of income so the burden of household debt is growing heavier.”