Household debt level eases

Overall household debt, including credit card purchases, shrank during the first quarter and posted its slowest year-on-year growth since the third quarter of 2011, the Bank of Korea reported yesterday.

Household debt totaled 961.6 trillion won ($853 billion), 2.2 trillion won less than fourth quarter of 2012. The BOK revised household debt for the fourth quarter last year from estimates of 959.4 trillion won to 963.8 trillion won.

First quarter overall household debt, however, saw its biggest drop since the first quarter of 2009, when it fell 3.1 trillion won from the previous quarter. Nonetheless, the debt growth rate was a modest 4.9 percent year-on-year.

The main driver was declining credit card purchases. Household loans added 2.1 trillion won from the previous quarter to 908 trillion won, while credit cards slipped 4.3 percent to 53.6 trillion won.

“Several services by credit card companies, including noninterest installment payments, have been reduced,” noted a BOK official.

Credit card companies have cut services due to pressure to lower their commission rates.

Another factor discouraging credit card use is the government offer of larger tax benefits for debit card use as a way to help restrain debt.

However, the market expects a significant increase in loans in the second quarter thanks to such government measures as tax benefits to boost the real estate market.

Housing transactions in Gangnam, Seocho and Songpa, southern Seoul, were up 80 percent year-on-year as of April 30. Nationwide, housing transactions grew 12.3 percent.

By Lee Ho-jeong [ojlee82@joongang.co.kr]