Household debt continues climb
The outstanding debt owed by households to financial institutions stood at 688.4 trillion won ($613 billion) last month, an 11.8 percent and 6.1 trillion won increase from last year.
The increase was the second-highest September figure since records began being kept in their current form in 2008. As September typically sees lower demand for loans due to special bonuses given out for the Chuseok harvest holiday, the average debt increase in September between 2010 and 2014 was 1.6 trillion won.
The September reading was particularly disappointing because market watchers expected that measures announced in August would reduce the size of loans. The Ministry of Strategy and Finance had pledged to tighten requirements for mortgage loans taken out by groups of borrowers looking to buy several apartment units. It also asked the state-run Korea Land & Housing Corporation to reduce the supply of apartment units on the market.
Nevertheless, mortgage loan debt jumped 1.03 percent, or 5.3 trillion won, from last year. “Mortgage loans showed a constant rise due to growing housing transactions and steady demand for group loans,” the Bank of Korea said in a statement.
Growth in overdraft loan debt, which contributed most to a record-high household debt growth rate in August, decelerated a bit in September. Overdraft loan debt increased 800 billion won in September from last year, compared with a 2.5 trillion won increase in August.
Corporate lending recorded 752.7 trillion won in September, growing by 1.8 trillion won from last year. An official at the central bank said that self-employed men drove the growth.
“Big corporations as well as small and midsize companies reduced the loan scale last month, but independent businessmen borrowed more money from the banks,” the official said.
In its latest measure to slow the impact of rising debt on the financial sector, the Financial Services Commission, the country’s financial regulator, is pressing major banks to tighten screening on loans, especially mortgages.
Earlier this week, Yim Jong-yong, chairman of the Financial Services Commission, said it would strengthen monitoring of local banks and other lenders to curb household debt.
Mortgages from the country’s six largest lenders - KB Kookmin Bank, Shinhan Bank, Woori Bank, KEB Hana Bank, NH Bank and Industrial Bank of Korea - increased by 742 billion won in the first five business days of this month.
The amount represents a 42 percent decrease from a year earlier, according to data compiled by the banks.
Analysts project that the growing debt number will push the Bank of Korea to hold the key rate at its record-low 1.25 percent for October during a rate-setting meeting today.
BY PARK EUN-JEE [firstname.lastname@example.org]
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