One in 20 household loans at risk of default

Nearly 5 percent of household loan holders are at serious risk of defaulting, with the rate of the low-credit group rising amid growing household debt concerns, data showed yesterday.

The number of defaulters reached 797,000, or 4.78 percent of a total of 16.7 million borrowers, as of end-March, according to the data from local credit appraiser NICE Information Service.

This refers to those who are more than three months behind in their principal repayments, or have had their default status reported to a local banking association for the last 12 months.

The ratio of those with low credit came to a whopping 18 percent, up 2 percentage points as of March from a year earlier, the data showed.

The bulk of household defaults in the low-credit group came as borrowers became less able to repay their home-backed loans, largely due to an economic slowdown, which prompted a fall in housing prices.

“The low-income group with debts owed to more than one lender was the first to be hit by a faltering property market,” said Kim Sun-bin, a chief economist at Samsung Economic Research Institute.

With the country’s household debt standing at 911.4 trillion won ($805.1 billion) as of March, the chances of more defaults are high, ramping up the risk for borrowers with low credit ratings, market watchers said.

The local financial regulator noted the default in household loans trails the cyclical fluctuation by about six months, meaning the situation could get worse as the economy continues to lose steam. Yonhap