Monthly interest hits a record high for homes

Korean households’ interest payments hit a record high last year as household debts rose to the highest level in a decade, data showed yesterday.

Households with two or more family members paid a monthly average of 95,387 won ($88) in interest on debts in 2012, up 8.6 percent from a year earlier, according to the data by Statistics Korea.

The average yearly interest payment by households with two or more family members reached 1,144,644 won last year.

The ratio of households’ income to their interest payment came to 2.34 percent last year, the highest level since the statistics agency began to compile related data in 2003, as household income growth of 6.1 percent fell behind interest payment growth of 8.6 percent.

The debt used to calculate the findings included loans for home purchases and other household expenses. If borrowing for business purposes was included, the ratio could have been higher, experts said.

Households’ interest-to-income ratio has been on the steady increase since 2008 when it rose to 1.92 percent, followed by 1.95 percent in 2009, 2.14 percent in 2010 and 2.29 percent in 2011.

The interest-to-income ratio of households in the highest 20 percent income bracket reached 2.06 percent, the lowest level among all income brackets, according to the data.

“The fall in interest cost for high income households was mainly attributed to a prolonged local property market slump,” Lee Jun-hyeop, a researcher at Hyundai Research Institute.

Household debt totaled 595.4 trillion won as of the end of last year, up 47.5 trillion won from a year ago.Korean households’ spending on education declined to a six-year low last year due to an economic downturn and increased government subsidies, data showed Sunday.

Meanwhile, the ratio of education expenditures to consumption spending in a household with two or more family members reached 12 percent, the lowest level since 2006 when it was 11.5 percent, according to the data by the statistics body.

Households’ education expenditure-to-consumption spending ratio rose at double-digit rates in 1997, posting 10.3 percent. It had been on the increase until 2009 when it logged 13.7 percent.

However, the ratio has moved downward since then: 13.4 percent in 2010 and 12 percent in 2012. Yonhap