Debt Exceeds 30 Million Won Per Household

The debt per household has exceeded 30 million won for the first time ever.

According to “The household credit trends for the third quarter of 2004 (July-September)” that the Bank of Korea released on December 6, the balance for household credit marked the highest level ever, 465.204 trillion won, since the end of September. This amounts to four times the government’s general account budget for this year, showing an increase of 7.1874 trillion won (1.6 percent) compared to the end of June, and 25.2559 trillion won (5.7 percent) compared to one year ago.

The household credit is the sum of household loans and credit purchases and is increasing, going from 267 trillion won at the end of 2000, 342 trillion won at the end of 2001, and 439 trillion won at the end of 2002, to 448 trillion won at the end of 2003.

The debt per household, which is the result of dividing household credit balances by the number of total households (15.298 million households by November 2003), turned up the figure of 30.41 million won.

This is 115 million won more than the end of last year (29.26 million won), and 470 million won more than the end of June of this year (29.94 million won).

Of household credit, household loans amounted to 441.1968 trillion won, showing an increase of 7.4375 trillion won (1.7 percent).

The bank advance also increased 5.3531 trillion won compared to the previous quarter due to the rise in mortgage loans.

On the other hand, loans from loan companies decreased 2.607 trillion won as the use of cash services for credit card companies has decreased.

The percentage for household loans for each financial company was 61.3 percent for banks, 14.9 percent for credit unions, 10.0 percent for insurance companies, 6.8 percent for loan companies, and 1.9 percent for mutual savings banks and so on.

On the other hand, credit purchase balances through credit card companies, installment finance companies, department stores and motor companies have decreased 250.1 billion won (1.0 percent), turning up as 24.72 trillion won. It is showing a decrease for seven consecutive quarters after the first quarter of last year.

The credit purchase balance had decreased by five to six trillion won each quarter during last year, but the range of decrease is growing smaller this year, being -1.8625 trillion won for the first quarter, and -0.5094 trillion won for the second quarter.

The Bank of Korea’s deputy general manager of its financial statistics team, Chung Yoo-sung, said, “Although the range of credit purchases from motors, installment finance companies, department stores, and so on are decreasing hugely, it is hard to consider this situation yet as an indication of recovery of consumption.” and added, “Household loans are also steadily rising, centering on mortgage-backed loans or mortgage loans of the Korea Housing Finance Corporation.”

Kang-Woon Lee kwoon90@donga.com