South Korea Household Debt Growing Faster Than Income
South Korea Household Debt Growing Faster Than Income

South Korea Household Debt Growing Faster Than Income

South Korea Household Debt Growing Faster Than Income

South Korea’s household debt grew faster than disposable income in 2015, a government report showed Tuesday, amid concerns over record-high household debt.
As of March this year, an average Korean household had 361 million won ($303,000) in total assets, 66.5 million won in debt and annual disposable income of 40 million won. All three rose at a moderate pace, but debt grew the fastest, with 6.4% yearly gain, and income lowest with 2.4% growth, Yonhap reported.
The key findings came in a report jointly released by Statistics Korea, the Bank of Korea and the Financial Supervisory Service, to glance over a big picture of Korean households’ financial well-being.
The report comes as rising household debt is being cited as a major downside risk by economists. The total household debt is estimated to have exceeded 1,300 trillion won as of October, according to government data.
Out of the total debt, 70% constituted borrowings from financial institutions and the remaining 30% were down payments that landlords have to return to tenants upon completion of the housing contract. The majority of financial debt was in mortgage loans, which took up about 58% of the total debt, the report said.
The combined debt of households with top 20% of income earnings accounted for 47% of total debt, while that of those at the bottom 20% took up 3.9%.
By age, people in their 50s were the most heavily indebted with an average of 83.8 million won in debt per person, followed by 40s with 80 million won and 30s, 58.7 million won.
In contrast, the average disposable income only inched up 2.4% last year to 40 million won from a year earlier, due to weak growth in wages and business income.
Households’ financial health, gauged by the proportion of financial debt out of the disposable income, has worsened, up 5.5 percentage points to 116.5% in 2015, the report said.
“The government will conduct a stress test on financial institutions and individual borrowers to prepare for a rise in market interest rates,” the finance ministry said in a separate statement.
 “The government will also apply stricter lending rules to group mortgage loans for newly built apartment purchases, and to borrowings from nonfinancial companies.”


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