South Korea’s household debt increased nearly 6 percent on-year last year, hitting a new high. It showed a slower pace of growth due to government policies aimed at easing the household debt problem, such as the introduction of stricter loan screening. However, it still increased at a faster pace than household income.
South Korea's household debt totaled 1,534.60 trillion won (US$1,364.09 billion) as of the end of December, up 83.80 trillion won (US$74.49 billion), or 5.8 percent, from a year ago, according to data released by the Bank of Korea on Feb. 24. Household credit includes the combined loans from financial institutions, such as banks, insurance companies, money lenders and public financial institutions, and credit card debts.
Household debt amounted to 1,444.50 trillion won (US$1,284 billion) in the fourth quarter of last year, while credit card debt totaled 90.20 trillion won (US$80.18 billion). The figure showed a decrease from 21.5 trillion won (US$19.11 billion) at the previous quarter and 31.60 trillion won (US$28.09 billion) a year earlier. Household debt in the fourth quarter of last year had the lowest growth in four years and two months after 5.7 percent in the second quarter of 2014. The growth rate of household debt surged to 11.6 percent in the fourth quarter of 2016 but dropped to 8.1 percent in the fourth quarter of 2017 and some 5 percent in the fourth quarter of last year, falling for eight consecutive quarters. Annual gain fell short of 100 trillion won (US$88.89 billion) for the first time in four years after 66.20 trillion won (US$58.84 billion) in 2014.
However, household debt is still expected to have a higher growth rate than household income. This is because the volume of household debt rapidly increased over the last three to four years. The growth rate of household's disposable income stood at 4.5 percent in 2017, while that of household debt reached 8.1 percent. Assuming that the growth rate of household's disposable income last year is similar to that of 2017, it is still higher than the growth rate of household income.
Household debt in the fourth quarter increased by 17.30 trillion won (US$15.38 billion) compared to the previous quarter so the growth rate was lower than 18 trillion won (US$16 billion) at the previous quarter and 28.80 trillion won (US$25.60 billion) a year ago. The loan balance of deposit banks came to 713.10 trillion won (US$633.87 billion) at the end of 2018, up 52.40 trillion won (US$46.58 billion) from a year earlier. It showed a faster pace of growth than 43.30 trillion won (US$38.49 billion) a year ago because of a steady increase in demand of loans for balance payment and rent deposits as a growing number of people moved into a new apartment house which they purchased two to three years ago.