Household credit balances shrink for first time in 4 quarters

Seo Jeong-seok, head of the financial statistics team at the Bank of Korea (BOK) speaks during a press briefing in central Seoul on Tuesday. [BOK]

Korea’s household credit balances declined for the first time in four quarters in the January-March period, data from the central bank showed Tuesday.

The latest downtick is attributed to high interest rates and sluggish housing transactions as well as stricter loan issuance regulations implemented in a bid to rein in last year’s steep surge in household debt.

According to preliminary data from the Bank of Korea (BOK), the country’s outstanding household credit, which includes both outstanding loans and credit card purchases, declined by 2.5 trillion won ($1.8 billion), or 0.1 percent, to 1,882.8 trillion won in the first quarter from the preceding three-month period.

The figure has been growing since the second quarter of last year. Growth accelerated to its peak in the third quarter, during which household credit jumped 0.9 percent, or 17 trillion won, to 1,878.3 trillion won, before slowing to an on-quarter increase of 0.4 percent in the October-December period.

Outstanding household loan balances stood at 1,767.0 trillion won, down by 200 billion won from the end of last year.

Mortgage loans increased by 12.4 trillion won to 1,076.7 trillion won in the first quarter, ebbing from the previous quarter’s 15.2 trillion won expansion and a record of 17.3 trillion won in the third quarter.

Household credit purchases declined by 2.3 trillion won, partially due to a base effect stemming from a seasonal increase in credit card purchases at the year's end.

“The government’s scheme designed to tame household loan growth after the surge in the second and third quarters of last year has shown results,” said Seo Jeong-seok, head of the financial statistics team at the BOK, during a press briefing in central Seoul on Tuesday.

Seo projected that country's the household debt-to-gross domestic product ratio, one of the highest among major economies, is likely to stabilize with the current trend.

BY SHIN HA-NEE [shin.hanee@joongang.co.kr]