Debt load eases as households shun plastic
According to the Bank of Korea yesterday, households owed 911.4 trillion won ($772.2 billion), including on payment made by plastic, in the first three months of the year. This marked a 500 billion won retreat from the fourth quarter of 2011.
The figure has not posted a quarterly fall since the start of 2009, when the economy was reeling from the impact of the global credit crunch.
“Although on-year debt still expanded 7 percent, the growth rate has been decelerating since the third quarter of 2011,” said an official at the central bank. He cited the sluggish housing market and the positive impact of employees feeling temporarily flush from their Lunar New Year bonuses as secondary factors after the move away from credit cards.
As consumers relied less on their cards, purchases dropped 1.2 trillion won below the previous quarter’s 53.6 trillion won. Over the same period, however, mortgage loans grew 600 billion won from the previous quarter to 857.8 trillion won.
Borrowing from banks dropped 2.7 trillion won to 453.1 trillion won, but this was partially offset by loans from savings banks, credit unions and other nonbanking institutions inching up on-quarter.
In the last three months of last year, borrowing from such institutions expanded 8 trillion won, whereas in the first three months of this year it added 200 billion won for a grand total of 184 trillion won.
The aggressive inflation of household debt since the global crisis of late 2008 has been considered a ticking time bomb that will not only throw the financial market into a panic but also dent the nation’s economic growth.
Experts have warned that the financial burden caused by high levels of debt will undermine consumer spending, a threat made worse by shrinking exports.
Burdened by rising inflation on essential daily goods and the government’s loose monetary policy, households have been borrowing at record levels.
Concerned by the mountain of debt, the government has pressured lenders to toughen their eligibility rules, relegating riskier loan prospects to nonbanking and private lenders who demand higher interest payments.
By Lee Ho-jeong [firstname.lastname@example.org]
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