Household debt rises in April led by moving costs

Korean banks’ household loans rose in April from the previous month due to people borrowing more money to pay for moving expenses, the central bank said yesterday.

Local banks’ household loans, including home-backed loans and credit loans, reached 453.6 trillion won ($397.9 billion) as of the end of April, up 1.34 trillion won from a month earlier, according to the Bank of Korea.

Household lending rose during the month as people drew more mortgage loans to cover moving costs and borrowed money using personal overdraft accounts, it said. Many Koreans move in spring and fall to take advantage of the good weather.

The rise comes as the Korean government and financial watchdog have been trying to put a lid on mounting household debts as heavy indebtedness is feared to squeeze private consumption, one of two growth engines of the domestic economy.

Home-backed loans increased by a little more than 1 trillion won last month from March, compared with a 1.1 trillion won monthly gain reported in the previous month.

Korean banks’ corporate lending also rose in April from the previous month fueled by demand from large companies, the BOK said.

Corporate loans by local banks gained by 6.3 trillion won on-month to 577.6 trillion won, exceeding a 3.2 trillion won gain in March.

Bank lending to large firms expanded sharply by 6.56 trillion won to 132.0 trillion won, while loans to smaller firms contracted by 241.4 billion won to 445.6 trillion won, according to the central bank.

Yonhap