Household loan average tops 95 million won mark on home buying

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Household loan average tops 95 million won mark on home buying

Published: 25 Dec. 2024, 16:41

SHIN HA-NEE
[email protected]

Audio report: written by reporters, read by AI

AMTs booths of major banks in Seoul on Dec. 25 [YONHAP]

The average outstanding loan balance per borrower in Korea surpassed the 95 million won ($65,100) mark for the first time ever as of the end of September, data from the Bank of Korea (BOK) showed Wednesday.

According to the central bank data submitted to the office of People Power Party Rep. Park Sung-hoon, the average for outstanding household loans per individual debtor stood at 95.05 million won as of the end of the third quarter.

The figure breached the 90 million won mark for the first time at the end of the first quarter of 2021 at 90.54 million won per borrower.

Despite the benchmark policy rate rising steeply from 0.5 percent to 3.5 percent to fight post-pandemic inflation during in the three and a half years since, the average outstanding loan balance logged growth of 5 million won.

From the first quarter of 2021 through the third quarter of this year, the total balance of outstanding household loans rose from 1.789 quadrillion won to 1.876 quadrillion won, up 4.8 percent. The number of household debt holders, which stood at 19.76 million by the end of March 2021, peaked at 19.94 million in 2022, and came to 19.74 million by the end of September.

The total outstanding household debt in 2024 began to rise in the second quarter of this year, from 1.853 quadrillion won by the end of March to 1.859 quadrillion in June, driven by growth in housing transactions especially in the Seoul region. During the cited period, the average debt per borrower rose from 93.89 million won to 94.28 million won.

The growth in household debt, after peaking in August, has been slowing through the fourth quarter with the financial authorities and banks implementing stricter loan regulations.

“While household debt [growth] is expected to continue to slow down, the impact of the interest rate reduction on the household debt situation needs to be monitored constantly,” noted the BOK in its monetary policy plan for next year issued on Wednesday.

Advertisement at a real estate agency in Seoul shows rental and sale prices for apartments on Oct. 20. [YONHAP]

Meanwhile, the delinquency rate has inched up by 0.01 percentage point on quarter to 0.95 percent by the end of September.

While the delinquency rate at banks remained unchanged at 0.36 percent, nonbanking lenders saw a 0.06 percentage point increase to 2.18 percent, a nine-year high since the 2.33 percent logged in 2015.

“It is of the utmost importance to closely monitor household debt, the powder keg of the Korean economy, to prevent any surges in the future, and to devise a plan in order to reduce household debt for financially vulnerable demographics,” said Rep. Park in a release.

As domestic demand remained persistently sluggish throughout the year, self-employed borrowers in the low-income bracket were among those hardest hit by the weak economy.

The delinquency rate of self-employed borrowers with low credit scores and income levels in the bottom 30 percent stood at an average of 11.55 percent as of the end of the third quarter, according to a half-year financial stability report issued by the BOK on Tuesday. The average delinquency rate of the self-employed in general, which has constantly been on the rise through this year, stood at 1.7 percent.

“Given that the number of low-income, low-credit, self-employed borrowers has been on the rise recently, it is necessary to take a selective approach [to policy] based on the borrowers’ repayment capacity,” noted the BOK in the report.

BY SHIN HA-NEE [[email protected]]