South Korea's Household Debt Grows at Slowest Pace in 3 Years
(Bloomberg) -- South Korea’s household debt rose at the slowest pace in three years in the first quarter of 2018, as the government took steps to prevent overheating in the property market.
Household debt rose to a record 1,468 trillion won ($1.4 trillion) as of the end of March, up 8 percent from the same period a year earlier, according to a statement from the Bank of Korea. From the fourth quarter, the amount rose 1.2 percent.
President Moon Jae-in’s administration has taken a series of measures to tighten financial institutions’ lending terms and slow debt growth. While policy makers say the amount of debt isn’t an imminent threat to Korea’s financial system, they say lower-income borrowers may default as interest rates rise.
While the increase of 8 percent is still large, it’s below the 8.2 percent average rise seen from 2005 to 2014, before a series of interest-rate cuts led to sharper increases in household debt. The government’s goal is to keep annual growth below 8.2 percent.
The debt figures come a day before the central bank reviews its benchmark interest rate on Thursday. How board members assess the data -- whether they focus on the record-high amount or the slower growth -- would be of interest to investors and analysts. The debt was one reason analysts had forecast the BOK’s next policy change would be a rate increase.
Bank loans accounted for almost half of the increase in the debt from the previous quarter, while other financial institutions such as insurers and the Korea Housing Finance Corp. accounted for slightly less. Credit card purchases accounted for the rest.
©2018 Bloomberg L.P.