Mortgage money has multiple usesOnly half of mortgages issued in the first quarter this year were spent on purchasing housing, according to a Financial Supervisory Service report issued on Tuesday.
The report, distributed by Rep. Shin Hak-yong of the opposition New Politics Alliance for Democracy, says that about 22.1 trillion won ($19.7 billion), or 50.8 percent, of the 43.5 trillion won in new mortgages issued in the first quarter went to home purchases.
The remaining half was used for other purposes. About 17.5 percent, or 7.6 trillion won, went to repay other loans and 12.3 percent, or 5.3 trillion won, toward living expenses.
Some people even used money from mortgage loans to run a business or acquire other assets (2.9 percent), with other purposes totalling 16.4 percent.
Finance Minister Choi Kyung-hwan eased mortgage requirements to boost the real estate market last year, with the ministry portraying the nation’s surging household debt as a sign the real estate market is rebounding. And alongside interest rate cuts by the Bank of Korea, the number of housing transactions has risen.
In May, there were transactions involving 109,872 housing units in Korea, a jump of 40.5 percent year-on-year.
According to a report Monday by the Ministry of Land, Infrastructure and Transport, home sales for the first five months of the year totaled 500,413, surging 25.2 percent year-on-year.
Over the same time period, the amount of mortgages spent on other purposes also increased.
In the second half of 2012, 10.3 percent of mortgages were spent on living expenses, but that rose 2 percentage points in the first quarter this year to 12.3 percent.
Including loans on credit cards, 19.3 percent of household debt nationwide went to living expenses in the first quarter, compared with 17.6 percent in the second half of 2012.
Despite concerns over household debt in excess of 1,000 trillion won last year, the government has said the current level is “manageable.”
“The fact that about half of mortgages was spent on other purposes, while the number of mortgages is surging means the structural problem of household debt in the country is indeed serious,” said Shin. “Although the amount of household debt is snowballing, the government has not shown a will to resolve the matter.”
BY KIM HEE-JIN [firstname.lastname@example.org]