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The debt service burden of South Korean households rose sharply last year, as their debt payments increased amid high inflation, the country’s central bank said Monday.
The so-called household debt service ratio, an estimate of the ratio of debt payments to disposable personal income, stood at 12.9 percent last year, compared with 11.4 percent a year earlier, according to the Bank of Korea.
“The DSR for all households, excluding the ones in the highest income bracket, rose by two or three points last year from a year earlier,” the central bank said in its semi-annual financial stability report.
The report comes as snowballing household debt became a source of headaches for South Korean policymakers, as rising debts are expected to crimp households’ capacity to service debt.
South Korean households’ debt has been on the rise as more people have sought loans to take advantage of super-low borrowing costs, driven by the BOK’s aggressive rate cuts.
As of September 2011, South Korea’s total outstanding household debts, which include loans and credit purchases, stood at a record 892.5 trillion won.
According to the report, about 56 percent of households in the country were indebted last year, compared with a 53.7 percent a year earlier.
The central bank said about 46 percent of mortgage loans extended to households are due before 2013, which would further increase debt service burden on households.
In March last year, the government re-tightened eased rules on mortgage lending in a bid to curb excessive growth of household debt.
South Korea imposed stricter lending rules on local banks in June 2011 to prod the lenders to raise the bar of household debts.
The move, however, was criticized for having jacked up household lending at non-bank firms.
The BOK has raised the key rate by 1 percentage point from a record low of 2 percent since July last year.
Meanwhile, the BOK said the global economy is likely to show a gradual recovery as European debt woes and geopolitical risks in the Middle East pose a threat. Consequently, downside risks will persist for the South Korean economy down the road, it said.
The central bank also said it will ensure price stability over the medium-term in addition to supporting economic growth.
(Yonhap News)
The so-called household debt service ratio, an estimate of the ratio of debt payments to disposable personal income, stood at 12.9 percent last year, compared with 11.4 percent a year earlier, according to the Bank of Korea.
“The DSR for all households, excluding the ones in the highest income bracket, rose by two or three points last year from a year earlier,” the central bank said in its semi-annual financial stability report.
The report comes as snowballing household debt became a source of headaches for South Korean policymakers, as rising debts are expected to crimp households’ capacity to service debt.
South Korean households’ debt has been on the rise as more people have sought loans to take advantage of super-low borrowing costs, driven by the BOK’s aggressive rate cuts.
As of September 2011, South Korea’s total outstanding household debts, which include loans and credit purchases, stood at a record 892.5 trillion won.
According to the report, about 56 percent of households in the country were indebted last year, compared with a 53.7 percent a year earlier.
The central bank said about 46 percent of mortgage loans extended to households are due before 2013, which would further increase debt service burden on households.
In March last year, the government re-tightened eased rules on mortgage lending in a bid to curb excessive growth of household debt.
South Korea imposed stricter lending rules on local banks in June 2011 to prod the lenders to raise the bar of household debts.
The move, however, was criticized for having jacked up household lending at non-bank firms.
The BOK has raised the key rate by 1 percentage point from a record low of 2 percent since July last year.
Meanwhile, the BOK said the global economy is likely to show a gradual recovery as European debt woes and geopolitical risks in the Middle East pose a threat. Consequently, downside risks will persist for the South Korean economy down the road, it said.
The central bank also said it will ensure price stability over the medium-term in addition to supporting economic growth.
(Yonhap News)
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Articles by Korea Herald
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