Household debt decreases at fastest pace ever in first quarter
Published: 24 May. 2023, 16:52
Updated: 24 May. 2023, 16:52
Household debt refers to household loans and credit purchases.
The amount of household debt in the first quarter stood at 1,853.9 trillion won ($1.4 trillion), down 13.7 trillion won from the previous quarter, according to the Bank of Korea’s preliminary data released Tuesday.
The drop in the first quarter was the deepest on-quarter dive and the first time household debt shrank for consecutive quarters. Household debt had risen for 38 consecutive quarters until the fourth quarter last year.
The central bank’s monetary tightening policy entailing high-interest rates discouraged loans and credit card transactions. Credit card transactions in the first quarter fell by 9 trillion won, or 0.5 percent, on quarter to slip for the first time since data compilation began in 2002.
“High rates and DSR [debt service ratio] regulation brought down demand on household loans,” said Park Chang-hyun, a financial statistics director at the Bank of Korea. “Purchases on credit also decreased as effects from end-of-year spending faded out and card companies cut back their interest-free installment benefits.”
The government has been maintaining the DSR regulation to prevent excessive mortgages and credit loans. DSR equals loan payments divided by income.
Household loans and credit purchases both declined for the first time, Park added.
Household loans dipped for three quarters to stand at 1,739.5 trillion won in the first quarter, down 10.3 trillion won on quarter. Except for mortgages, household loans fell by 15.6 trillion won between January and March, the steepest dive since 2007.
Mortgage loans increased by 5.3 trillion won to reach an all-time high of 1,017.9 trillion won as the property market thawed to supply 119,000 units in the first quarter, up 28,000 units from the quarter before.
“It’s premature to discuss the second quarter, but the dropping pace of household loans may slow down in the upcoming quarter as rates on loans tick down and real estate transactions pull through,” the financial statistics director said.
Loans from banks at the end of April rose for the first time in four months, up 2.4 trillion won on month, according to the Financial Supervisory Service and Financial Services Commission.
Credit purchases, including credit card transactions, in the first quarter logged 114.4 trillion won, down 3.4 trillion won on quarter. Credit purchases declined for the first time in nine quarters.
“It’s difficult to assert that credit purchases will continue to fall in the second quarter,” Park said in regards to credit.
The credit card transaction amount in April was more than that of the first quarter’s average, and face-to-face activities are expected to increase going forward.”
BY KIM KYUNG-HEE [sohn.dongjoo@joongang.co.kr]
with the Korea JoongAng Daily
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