Household Debt Increased 60 Trillion Won Last Year

Domestic household debts reached an all time high last year.

According to “2006 Household Credit Trends” released by the Bank of Korea yesterday, credit to households, which combines the outstanding amount of loans to households and merchandise credit, stood at 581.9635 trillion won as of the end of last year, an 11.6 percent jump from 60.4676 trillion won a year earlier.

The BOK analysis pointed out that increased loans to purchase homes and outstanding credit card debts contributed to the hike.

Outstanding household credit has exhibited continuous growth year-on-year from 27.948 trillion won in 2004 to 46.8336 trillion won in 2005, with an exception in 2003 when it stopped at 8.5077 trillion won in the aftermath of a government policy effort to curb household loans.

People took out loans last year primarily for housing purchases (54.6 percent) and consumption of goods (45.4 percent).

Loans by commercial banks jumped 40.7084 trillion won, while loans by non-banking financial corporations increased 12.992 trillion won. Loans by finance companies, which had fallen 2.7512 trillion won in 2005, surged 1.4763 trillion won last year.

Outstanding merchandise credit also increased by 3.5049 trillion won to 31.5322 trillion won as of the end of last year due to rising consumption at home and abroad.

kimsunmi@donga.com