A woman walks past a commercial bank promoting “jeonse” loans in Seoul on Thursday. (Yonhap)
The amount of “jeonse” loans for homes extended to Koreans in their 20s and 30s surged by nearly 60 trillion won ($50.9 billion) in the last five years, raising alarm over the growing household debt burden among young borrowers, a lawmaker said Friday.
Jeonse is a housing lease system unique to Korea whereby tenants pay a lump-sum deposit instead of monthly rent on a two-year contract.
The outstanding balance of jeonse loans at five major lenders here -- KB Kookmin Bank, Shinhan Bank, Hana Bank, Woori Bank and NH NongHyup Bank -- stood at 148.5 trillion won as of June, up 95.7 trillion won, or 181.2 percent from the same month in 2017, according to Rep. Jung Woon-cheon of the main opposition People Power Party. Jung referenced data from the Financial Supervisory Service.
Among jeonse loans, those taken out by people in their 20s and 30s soared to 88.2 trillion won from 29.1 trillion won during the given period. The two age groups accounted for 60 percent of the total jeonse loan balance.
The sharp rise in jeonse loans comes as apartment prices have soared.
The average price of jeonse apartments in Seoul have jumped by some 44 percent since May 2017 to 614.5 million won in June, data showed.
With the increase in the number of jeonse loan applications, the younger generations’ household debt has also swelled.
In the April-June period, the household debt held by those in their 20s and 30s came to 487 trillion won, up 13 percent on-year, which accounted for 27 percent of the total household debt estimated at 1,806 trillion won, according to data from the Bank of Korea.
“The government should closely monitor debt growth among young borrowers and come up with preemptive measures to ease their financial burden largely due to skyrocketing housing prices,” the lawmaker said.
By Choi Jae-hee (email@example.com