South Korean policymakers vow to control rising household debt

SOUTH Korea’s policymakers vowed to take measures to control consumer debt as the country’s household credit grew at the fastest pace in 1-1/2 years in the second quarter on rising mortgage demand.

Total household credit stood at 1,862.8 trillion won (S$1.9 trillion) at the end of June, up 0.5 per cent, or 9.5 trillion won, from three months before, central bank data showed on Tuesday (Aug 22).

It marked the fastest percentage gain since the last quarter of 2021, after two consecutive quarterly losses and following a record 0.8 per cent drop in the preceding three months.

Bank of Korea (BOK) governor Rhee Chang-yong said at a parliamentary session on Tuesday that policymakers will take micro as well as macro measures to control household debt, and that it would be problematic if the rising trend continued.

Rhee’s comments come two days before the BOK meets for its August policy review, at which the central bank is expected to leave interest rates unchanged for a fifth consecutive meeting.

Finance Minister Choo Kyung-ho also said the government would continue implementing strict policy to manage the debt.

SEE ALSO

South Korea consumer sentiment weakens in August on growth worries

South Korea flags risks in US$56 billion of overseas property funds

South Korea house prices snap 13 months of decline

South Korea to grant 23 trillion won in financing support for exporters

More

DECODING ASIA

Navigate Asia in
a new global order

Get the insights delivered to your inbox.

Mortgage loans increased 14.1 trillion won in the second quarter, more than triple the increase of 4.5 trillion won in the previous quarter, with a recovery in house transactions, the BOK said in a statement, while the decline in other loans also softened to 4.0 trillion won from 15.5 trillion won.

South Korea’s house prices rose in July for the first time in 14 months, separate data showed last week, as regulations eased and following the introduction of a policy loan to support the market.

Total credit was still down 0.3 per cent on an annual basis, after a 0.5 per cent fall in the March quarter. BLOOMBERG