(From the Korea Times)
By Kim Jae-won
Korea’s outstanding household debt topped 1,200 trillion won ($971.6 billion) for the first time last December, up 41.1 trillion won from three months earlier on increasing mortgages and household loans, the Bank of Korea (BOK) said Wednesday.
It was the biggest quarterly gain in the time the central bank has been compiling data, starting 2002. The household debt reached 1,207 trillion won at the end of December, up 3.5 percent from the previous quarter. The debt compares with the country’s GDP value of 1,464 trillion won.
The BOK’s household debt tally is the sum of household borrowing from financial firms and unpaid credit card bills.
Household borrowing from banks and other financial firms jumped 39.4 trillion won during the fourth quarter to 1,141.8 trillion won. Their unpaid credit card debts rose 1.7 trillion won to 65.1 trillion won during the same period.
The BOK’s announcement came days after Standard & Poor’s (S&P) warned of “high potential credit risks” involving the mounting debt.
“We think potential credit risks remain high given highly leveraged households,” S&P said in a report. “We saw some pickup in household debt in 2015, which has increased the vulnerability of highly leveraged Korean households to sudden drops in income or spikes in interest rates.” Read more