Korea’s Household Debt Exceeds 600 Trillion Won

As households are taking loans from banks based on credit, the total household debt in Korea surpassed 600 trillion won for the first time.

According to the Bank of Korea on Monday, as of the end of September, Korea’s credit-based household debt amounted to 610.6438 trillion won, an increase of 14.2031 trillion won compared to the end of June. Household debt based on credit includes loans (household debt) from financial institutions, including banks, and purchases with credit cards (purchase credit).

Based on data on the estimated number of households (15.99 million) in 2006, released by the Korea National Statistics Office, the debt of each household is 38.19 million won on average.

Korea’s household credit loans increased by 4.5534 trillion won year-on-year in the first quarter and soared by 9.9238 trillion won in the second quarter this year, compared to the same period last year. The amount of household debt expanded due to tightened regulations on collateral loans against housing, which in turn led to an increase in credit loans from the banking and non-banking institutions.

In the third quarter of this year, household debt from banks increased by 6.0114 trillion won, three times the 2.1886 trillion won increase in the previous quarter. Among new bank loans in the third quarter, mortgage loans accounted for only 38.5%, and other reasons including consumption, 61.5%. Loans from the non-banking institutions continued to show high, increasing by 5.0549 trillion won in the third quarter after the previous quarter’s 5.6565 trillion won increase.

ssoo@donga.com