Household debt growth slows
Outstanding debt owed by households to financial institutions came out to 708 trillion won ($598 billion) last month, a 3.5 trillion won increase from the previous month, the Bank of Korea said Thursday.
The growth in December is the smallest monthly increase in 10 months after several record-breaking figures. In November, household loans taken out from local banks swelled by 8.8 trillion won, the second-highest monthly increase since records were kept in 2008. Compared to the same month last year, household lending fell by 49.3 percent, or 3.4 trillion won.
In particular, mortgage debt fell 60.2 percent, or 4.3 trillion won, to 588 trillion won compared to the previous month. “Mortgage loans dropped dramatically because of falling housing transactions and rising interest rates,” said Yoon Dae-hyuk, a manager at the Bank of Korea’s financial market affairs team. “But it remains to be seen whether this trend will go on.”
Growth in overdraft loan debt, which contributed most to a record-high household debt growth rate in August, also decelerated in December, falling 200 billion won from a month ago to 174 trillion won.
Corporate lending also took a drastic turn downward as lending size fell 15 trillion won from the previous month, the lowest growth rate since records were kept in 2010.
The relatively modest increase offered rare sanguine news for the government. Since August, the Ministry of Strategy and Finance and Financial Services Commission have tried different measures, including tighter regulations governing mortgage lending and restrictions on housing built by state-run bodies, to keep a lid on debt.
The financial authorities also required lenders that are not banks to adopt more stringent underwriting rules to effectively take higher-risk borrowers out of the mortgage market.
Even with the measures, the debt level showed no sign of abating until December. It might be too soon for the government to claim victory, since overall debt levels still remain high. In a report by the Bank of Korea last month, Korea’s credit-to-GDP ratio reached a record 197.8 percent.
BY PARK EUN-JEE [firstname.lastname@example.org]