Debt per household hits record-high of W77 mil.

By Jhoo Dong-chan

The average amount of debt each household borrowed rose to an all-time high of 77 million won ($68,444) last December as more families took out loans to purchase houses or pay for living expenses amid worsening job market conditions, according to the Fair Trade Commission Sunday.

Experts say household debt will continue to increase at a faster rate than growth domestic product (GDP) for the foreseeable future.

According to the central bank, Korea's household debt totaled 1,534.6 trillion won ($1,364 billion) as of end of December, up 5.8 percent from a year ago. Household debt is defined as the combined debt of all members of a household, including bank, insurance, capital and credit card loans.

The average debt per household peaked at 77 million won in the period, also up 4.6 percent from a year ago.

The central bank has compiled statistics about the nation's household debt since 2002, and the figure has since steadily grown because more people have borrowed money from financial institutions for home purchases and to cover rising living costs.

There was a sharp increase in growth for two years from 2015 under the then Park Geun-hye administration. It implemented a set of stimulus measures to boost the lackluster real estate market while encouraging financial institutions to extend loans at record low rates to help people buy homes.

The Park administration eased the mandatory loan-to-value and debt-to-income ratio in 2014 to encourage more people to buy homes. The BOK also took the quantitative easing stance by lowering rate to a record low.

Thanks to the previous administration's efforts, the average debt for each household topped the 60 million won level for the first time in 2015. The figure also surpassed the 70 million won level next year.

The growth rates, however, started slowing down since the incumbent Moon Jae-in administration took the office in 2017. Reserving the previous government's stimulus stance, it began to adopt stricter regulations on new loans amid rising home prices.

“The Moon administration has implemented a series of strict real estate regulation measures. Thanks to the government's efforts, the nation's total household debt has been stabilized at the current level last year,” a member of the BOK's Monetary Board Committee said.

“The government will continue the hawkish stance to drag down the household debt throughout the year.”

An expert claimed, however, the government's stance will burden the nation's low-income bracket.

“Under the Moon administration's hawkish stance, loans are available to a small number of people with higher credit ratings. This is a tough time especially for low-income people. If they don't get a loan from banks, they would probably go to private money lenders with higher interest rates. This isn't helpful to ease the situation,” an LG Economic Research Institute researcher said.