By Choi Kyong-ae
Household loans jumped 4 trillion won ($3.7 billion) last month, marking the highest March growth in nine years, amid worries that declining interest rates could worsen household debt, the Financial Supervisory Service (FSS) said Monday.
"Fed up with ever-rising house rental costs, people increasingly resorted to home mortgages offered by banks to buy a house. Some others borrowed bank money for their living expenses due to low rates,"said an official from the FSS' Banking Supervision Department.
He expects household loans will continue to rise for the time being as lending rates remain at record lows. The central bank's key rate is at an all-time low of 1.75 percent after two rate cuts last year and this year.
In March, household loans soared 39.2 trillion won for the whole of 2014 after the Ministry of Strategy and Finance announced a 40 trillion won stimulus plan in August last year, data from the financial regulator showed.
In the January-March period this year, the corresponding figure grew 7.9 trillion won to reach a whopping 526.1 trillion won in accumulated household loans at the end of March, the data said.
The rise in loans is helped by increased transactions of apartments in Seoul. They jumped to 13,100 in March, up 55 percent from 9,500 a year earlier, the FSS said in a statement.
Analysts and economists have said that excessive household debt could result in decreased spending and increased non-performing loans at financial companies. Bad loans could ultimately threaten the health of the whole financial system, they said.
As for those concerns, the FSS official said that the authorities will thoroughly monitor banks' financial status.
"The government has to create jobs and help raise wages so that borrowers from the low income bracket can pay back their loans, Lim Jean, an analyst at the Korea Institute of Finance," said in a research note released last month.
Meanwhile, the government proposed the 40 trillion won "Relief Loans" in March in order to help a small portion of households convert their existing mortgages into fixed, low-rate ones, and also allowing them to pay principal and interest together on a monthly basis.
Installment payments of principal and interest was seen a measure to help families lower their overall debt over time, but the conversion program also drove up the household debt burden as they have to pay back principal as well, analysts said.
"Low-income borrowers may lose their jobs or suffer declining disposable income if the economy continues to slow down. The government needs to strengthen measures to prevent them from going bankrupt," Lim said.
Household loans jumped 4 trillion won ($3.7 billion) last month, marking the highest March growth in nine years, amid worries that declining interest rates could worsen household debt, the Financial Supervisory Service (FSS) said Monday.
"Fed up with ever-rising house rental costs, people increasingly resorted to home mortgages offered by banks to buy a house. Some others borrowed bank money for their living expenses due to low rates,"said an official from the FSS' Banking Supervision Department.
He expects household loans will continue to rise for the time being as lending rates remain at record lows. The central bank's key rate is at an all-time low of 1.75 percent after two rate cuts last year and this year.
In March, household loans soared 39.2 trillion won for the whole of 2014 after the Ministry of Strategy and Finance announced a 40 trillion won stimulus plan in August last year, data from the financial regulator showed.
In the January-March period this year, the corresponding figure grew 7.9 trillion won to reach a whopping 526.1 trillion won in accumulated household loans at the end of March, the data said.
The rise in loans is helped by increased transactions of apartments in Seoul. They jumped to 13,100 in March, up 55 percent from 9,500 a year earlier, the FSS said in a statement.
Analysts and economists have said that excessive household debt could result in decreased spending and increased non-performing loans at financial companies. Bad loans could ultimately threaten the health of the whole financial system, they said.
As for those concerns, the FSS official said that the authorities will thoroughly monitor banks' financial status.
"The government has to create jobs and help raise wages so that borrowers from the low income bracket can pay back their loans, Lim Jean, an analyst at the Korea Institute of Finance," said in a research note released last month.
Meanwhile, the government proposed the 40 trillion won "Relief Loans" in March in order to help a small portion of households convert their existing mortgages into fixed, low-rate ones, and also allowing them to pay principal and interest together on a monthly basis.
Installment payments of principal and interest was seen a measure to help families lower their overall debt over time, but the conversion program also drove up the household debt burden as they have to pay back principal as well, analysts said.
"Low-income borrowers may lose their jobs or suffer declining disposable income if the economy continues to slow down. The government needs to strengthen measures to prevent them from going bankrupt," Lim said.
