Per-Household Debt Reaches W38 Mil.
By Na Jeong-ju
Staff Reporter
Household debt surged to a record high of 631 trillion won in 2007 while growth slowed from the previous year due to the government’s stricter regulations on home-backed loans, the Bank of Korea (BOK) said Monday.
Household credit, covering loans to households by financial institutions and credit card purchases rose by 48 trillion won, or 8.4 percent, from a year ago, slowing from an 11.6 percent growth in 2006.
``The growth of banks’ lending to households slowed in 2007 as the government reinforced stricter lending rules to stabilize home prices,’’ an official from the BOK’s Economic Statistics Department said.
Year-on-year, the outstanding amount of loans to households grew 8.2 percent to 595 trillion won last year. This compares with a 9.3 percent rise in 2005 and a 9.3 percent growth in 2006. Per-household debt reached 38.4 million won ($40,600).
Household credit has risen sharply over the past few years in line with an economic recovery. The central bank said growing debt can weaken households’ capabilities to repay debts, but they also saw a rapid rise in financial assets.
As of the end of Sept. 2007, financial assets held by individuals stood at 1,687 trillion won, while debt owed to financial firms reached 713 trillion won, according to the central bank.
Household credit stood at 475 trillion won at the end of 2004, but rose to 521 trillion won in 2005, 582 trillion won in 2006 and 631 trillion won in 2007.
In the face of falling interest margins and sluggish demand for home-backed loans, banks have increased commercial loans lacking collateral to salary workers and the self-employed.
The rise in household loans may fuel liquidity growth in the market, dealing a blow to the country's efforts to contain growing inflationary pressure, according to analysts.