Household debt in Q3 hits record high

South Korea’s household debt exceeded 1,870 trillion won, hitting a record high again. Household borrowing, however, has reversed downward with the decline in demand for mortgage loans.

As of the end of September, total household credits outstanding increased by 2.2 trillion won from the end of June to stand at 1,870.6 trillion won, according to the Bank of Korea’s third-quarter household credit report. The increase was reduced compared to the second quarter (5.5 trillion won). Even compared with a year earlier, the household credits outstanding increased only by 25.1 trillion won, recording the smallest annual gain since the data set began in 2003.

Household credit refers to the credit extended by commercial banks and insurance companies to households plus credit purchases. Total outstanding household debts, which account for the largest proportion of household credits, declined by 300 billion won to stand at 1,756.8 trillion won. Household debt shrank by 800 billion won in the year's first quarter, hitting the second lowest since the data set began. The increase in mortgage loans declined (6.5 trillion won) compared to the preceding quarter (8.7 trillion won), and credit loans also reduced by 6.8 trillion won, marking a fourth straight downward trend.

Purchases on credit hit a record high for a second consecutive quarter, with an upward trend in consumption thanks to the lifting of social distancing rules. The outstanding credit purchases in the third quarter increased by 2.5 trillion won compared to the preceding quarter to stand at 113.8 trillion won, posting a record high with an increase of 13.2 trillion won (13.2 percent) from a year earlier.


Min-Woo Park minwoo@donga.com