Household debt hits new record highHousehold credit rose to a new record of nearly 900 trillion won ($790 billion) in the third quarter, despite quarterly growth slowing due to moves by the regulator to put the brakes on, the central bank said yesterday.
Household credit totaled a record 892.5 trillion won as of the end of September, up 16.2 trillion won from three months earlier, according to the Bank of Korea.
This marked a slowdown from previous on-quarter growth of 18.9 trillion won but still set a new record in terms of aggregate debt.
Household credit refers to credit purchases and loans for households extended by financial institutions, including commercial lenders and mutual savings banks.
“The regulator’s steps to curb household debt saw loan growth slow last quarter,” said Park Seung-hwan, head of the BOK’s monetary and financial statistics team.
But Park said that the on-year growth of household credit has stayed at around 9 percent all year and that the trend may continue into the fourth quarter.
Household lending by banks and non-bank depositary institutions totaled 628.6 trillion won as of end-September, up 10.8 trillion won from three months earlier.
Household loans extended by financial firms including insurers and card firms grew 4.2 trillion won to 212.3 trillion won in the most recent quarter, an indication that Financial Services Commission regulations prompted more people to rely on non-bank institutions.
Credit purchases stood at 51.5 trillion won as of the end of September, up 1.3 trillion won from the second quarter as more people used credit cards during summer vacations. Korea is grappling with growing household debt, which is seen as a threat to consumer spending as it could sap economic growth.
The regulator has unveiled a set of measures in an attempt to put a lid on this but they seem to have limited impact due to the growth in non-bank loans.
In August, for example, several banks halted the extension of household loans in a move seen as following the watchdog’s call to keep quarterly growth in this area at 0.6 percent.
Growing household debt is a major headache for policy makers, with the BOK in a dilemma over slowing growth and lingering inflationary pressure.
The central bank froze the key interest rate at 3.25 percent for the fifth straight month in November as downside risks from Europe’s sovereign debt outweighed persisting inflationary concerns.
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