The Korea Herald

지나쌤

Household finance squeezed with growing debt: report

By Korea Herald

Published : Nov. 11, 2011 - 21:06

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A government report showed Friday a steep deterioration in household finances, citing a much faster rate of debt growth than asset increases.

A joint report by the Statistics Korea, the Bank of Korea, and the Financial Supervisory Services said the average household debt expanded 12.7 percent to 52.05 million won ($46,143) for a year ending March, outgrowing the 7.5 percent expansion of total assets to 297.65 million won per household on average.

People with mortgages saw a particularly tight squeeze on their finances. Home-backed loans accounted for 79.2 percent of the total financial debt, or 28.5 million won on average. Household financial debt, which makes up 69.1 percent of total debt, grew 14.2 percent for a year until March to 35.97 million won, while security deposit holdings from home rentals grew 9.5 percent to 10.08 million over the same period, the report said.

“Household finances and debt have worsened especially for start-up entrepreneurs and those on low-incomes. More policy measures need to be considered to micro-finance them,” a Finance Ministry official said.

Real estate took up the biggest portion of household assets, making up 73.6 percent of the total in average or 219.1 million won on an average.

Household debt has been swelling to a record high, alarming policymakers and conglomerates eager to boost domestic consumption and juggle financials stability. Household debt jumped from over 500-trillion-won six years ago to 876.4 trillion won at the end of June, adding 19 trillion won in just three months ending June.

Figures are suggesting that Korean families have been stretching their debt to their borrowing capacity as more were driven by speculative demand for property in the past few years. BOK says the growth of mortgages approved by commercial banks slowed in the 12 months with the transaction freeze in the property market, but this was offset by an increase in credit card loans and borrowings from non-banking institutions.

By Cynthia J. Kim (cynthiak@heraldcorp.com)