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S. Korea’s household debt growth slows down in 2016 following stricter regulations

Collected: 2017.02.06

Distributed: 2017.02.07

Source: Go Direct

South Korea’s household debt last year rose 10.8 percent from 2015, slowing from the previous year after the government doled out a slew of actions including toughened borrowing guidelines to curb the country’s snowballing household debt.

According to data released from the Financial Supervisory Service (FSS), outstanding bank loans to households in 2016 grew 10.8 percent from the previous year, easing from 14.0 percent on-year growth in 2015. Household debt gained by 68.8 trillion won ($60.5 billion) on year in 2016 versus 78.2 trillion won in 2015.

Under toughened guidelines from last February, commercial banks must take into consideration a borrower’s affordability to pay back loans more than their collateral in approving new loans. In addition, new mortgage borrowers would have to repay the loan balance plus interest on an installment basis from the beginning.

Following the stricter screening process, the government has introduced a series of other measures to rein in the country’s growing household debt driven by a massive inflow of newly built apartments and banks’ excessive group loans amid the country’s booming property market last year. The fast-growing household debt began to slow after the additional countermeasures announced on August 25 and November 3. The financial regulators additionally raised the bar on bank loans, leading the country’s property market to enter a slack season and curbing household debts.

Financial regulators aims to check the household debt growth within 6 percent range this year.

By Park Yoon-ye

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