South Korea’s Yoon promises help for low-income borrowers

SOUTH Korean President Yoon Suk Yeol pledged on Thursday to implement policy measures aimed at easing the debt-service burden on low-income earners and the young people at a time of increasing interest rates.

"While interest-rate increases have been an inevitable action to contain consumer price growth, the burden should not totally be transferred to economically vulnerable sectors of society," Yoon said, adding the government would adopt policy measures to help them. 

He made the comment at his weekly meeting on the economy, held a day after the country's central bank raised the policy interest rate by half a percentage point to fight inflation, making the biggest single rate hike on record. 

Since August last year, the Bank of Korea has raised its policy rate to 2.25 per cent from a record low of 0.50 per cent in order to dampen an inflation rate, which last month had quickened to its highest since the late 1990s. 

The latest Reuters poll predicted the Bank of Korea's policy rate would stand at 2.75 per cent by the end of this year. 

Analysts welcomed Yoon's commitment to helping economically vulnerable borrowers. 

"There's little new announced today but it's the right thing that the government shows its commitment and readiness so as to give a sense of preparedness," said Park Sang Hyun, economist at HI Investment & Securities.

Recent opinion polls have indicated a rapid decline in Yoon's popularity just two months into his presidency, with the approval rating falling far below the disapproval rating in many surveys.

During Yoon's meeting with top government officials including the finance minister, the Financial Services Commission reported that it would expand a programme to help low-income borrowers switch adjustable-rate mortgage loans to fixed-rate loans at affordable rates. 

Data from the commission showed households had 1,860 trillion won (S$2 trillion) of debt at the end of last year, equivalent to nearly 90 per cent of the gross domestic product. The data also showed adjustable-rate loans accounted for 46 per cent of the debt. REUTERS

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