One in two households held bank loans in 2011

More than half of Korean households owed debts to local banks in 2011 as they borrowed money to help support living costs, a poll showed yesterday.

According to the survey of 2,030 households by the Bank of Korea (BOK), 54 percent had borrowed money from financial institutions as of last December.

Among those surveyed, 22.5 percent said they had taken out fresh loans between July and December of last year. A third of these took out loans to support the cost of living.

Heavy household debts are cited as a key risk to the economy this year as debt-laden consumers are focusing on repaying loans rather than spending, which would boost growth.

Korea’s outstanding household debts, which include loans and credit purchases, stood at a record 892.5 trillion won ($794.8 billion) at the end of September.

Although household bank loans have fallen in the last couple of months, many experts believe the total figure already exceeds 900 trillion won.

The BOK survey showed that inflation and an economic slowdown were the two biggest economic challenges for household finances in 2011.

Around half of the respondents said the government should make stabilizing consumer prices and real estate prices its top priority. More than 70 percent of the households said the central bank should make these key concerns in their monetary policy decision-making, according to the poll.

The central bank has kept the nation’s key borrowing rate at 3.25 percent for the last eight months.

Yonhap