Household debt up 7.8% on year in fourth quarter to record
Household debt rose 7.8 percent in the fourth quarter on year to a record 1,862.1 trillion won ($1.55 trillion), according to the Bank of Korea.
The increase came as Koreans borrowed heavily to buy properties and invest in shares, especially initial public offerings.
Household debt was up 134.1 trillion won in the fourth quarter on year, the largest value increase since 2016.
Household debt includes loans from banks, insurers and other private and public lenders, and credit card debt. Mortgages are included.
Mortgages were up 7.9 percent on year to 982.4 trillion won. Credit-card debt rose 11 percent on year to 106.3 trillion won.
The debt grew rapidly through the third quarter, but growth started to slow in the fourth quarter as interest rates rose. The central bank increased rates twice in 2021.
On quarter, household debt was up 1 percent on year.
"The increase rate for household debt was relatively large from the first through the third quarter," said Song Jae-chang, head of monetary and financial statistics team at the Bank of Korea, during an online press conference held on Tuesday. "The rise in demand for home purchases and jeonse increased mortgages while demand for funds to put in the stock market also led the loan growth."
Jeonse is a rental system common in Korea in which tenants pay a large deposit upfront in lieu of monthly rent.
"The growth rate was curbed in the fourth quarter as a result of the government regulations on household loans and the rise in loan rates," Song added.
The Bank of Korea could announce another rate increase as early as Thursday. Demand for loans could be curbed further if the central bank's monetary policy board further ups the rates.
BY JIN MIN-JI [firstname.lastname@example.org]