World Economy

S. Korea Household Debts at Record High

S. Korea Household Debts at Record HighS. Korea Household Debts at Record High

Household loans extended by local banks rose at a fast clip in March due to a large increase in mortgage loans, central bank data showed Monday.

Outstanding household loans extended by lenders here came to 649 trillion won ($564.2 billion) as of end-March, up 4.9 trillion won from the previous month, according to the data from the Bank of Korea, Yonhap reported.

The on-month gain marked a significant acceleration from the 2.9 trillion won increase the previous month or a 2.1 trillion won rise in January.

“Home-backed loans spiked 4.4 trillion won from a month earlier in March as demand for fresh loans also increased during the spring moving season,” the BOK said in a press release.

In March, the number of home transactions involving apartments in Seoul reached 7,100, spiking 42% from 5,000 the previous month, it added.

Credit loans, on the other hand, gained 500 billion won from a month earlier, apparently reflecting a slump in consumer spending that continues to drag down the local economy.

Household debt reached a record high of 1,207 trillion won as of end-2015, while the central bank kept its policy rate at a record low of 1.5% in an attempt to bolster growth in Asia’s fourth-largest economy.

Household spending, however, has dipped to an all-time low in 2015, possibly suggesting that the record amount of money borrowed was mostly spent in areas with little or no immediate impact on the economy, such as the real estate market.

Also reflecting a slowdown in domestic consumption, local businesses continued to reduce their borrowing.

As of end-March, outstanding loans extended to local firms came to 734 trillion won, up 700 billion won from a month earlier. This marked a slowdown from the 2.4 trillion won increase in February and the 6.9 trillion won rise the month before.


South Korea’s M2 money supply continued to grow though at a moderate pace in February, largely on an increase in money invested in funds and securities, BOK data showed.

The M2 refers to currency in circulation, including bank debentures and deposits with a maturity of less than two years, along with stock investments. It, however, does not include government or corporate bonds.

The M2 came to 2,279.1 trillion won ($1.98 trillion) as of the end of February, up 0.5% from a revised 2,266.9 trillion won the previous month, the BOK said.

From a year earlier, the February tally marked 8.1% growth. The rise in February marked a slowdown from a 1.1% on-month gain in January, apparently reflecting continued woes in the financial market stemming from the possibility of a US rate hike.