The pace of debt growth gets faster… Household/economic burden when interest rates rise

Low interest rate keynote Until when… A bank loan window in Seoul on the 10th. According to the’Financial Market Trends in February 2021′ announced by the Bank of Korea on that day, the balance of household loans by banks at the end of last month was KRW 103.1 trillion, an increase of KRW 6.700 trillion from the previous month. Based on the annual increase in February, it is the second largest increase since 2004 when statistics were made. Reporter Lee Jae-moon

It is analyzed that the low interest rate trend caused by the novel coronavirus infection (Corona 19) has had a big impact on the bank’s household loan balance exceeding 1,000 trillion won for the first time in history. Although the real economy has not improved, it can be seen that the liquidity is abundant and investment funds are concentrated in real estate and stocks. Although the situation is not so unstable that the problem of household debt insolvency will explode right away, if interest rates rise in the future, it is likely to put a considerable burden on households as well as the national economy.

According to the Bank of Korea’s’Financial Market Trends in February 2021′ on the 10th, the balance of household loans to banks as of the end of February was 101.3 trillion won. This is the first time since the statistics of the Bank of Korea have exceeded 1,000 trillion won in household loans.

The number of 1,000 trillion won is itself, but the more worrisome is the steep debt growth rate. Looking at just one month in February, the increase in household loans was 6.7 trillion won, down from last January (7.6 trillion won). However, if you look at a longer time series, the trend of debt growth is steep.

The bank’s household loan balance exceeded 600 trillion won in July 2015, and it took 1 year and 4 months to exceed 700 trillion won in November 2016. Since then, it took 1 year and 9 months to reach 800 trillion won and 18 months to reach 900 trillion won. It took only one year for the balance to exceed 1,000 trillion won.

Last year, the enthusiasm for real estate investment was hot. Although the government came up with various real estate measures, the volume of apartment sales increased, and △54,000 households in September last year △72,000 households in October △94,000 households in November △87,000 households in December. Apartment transaction volume increased, prices skyrocketed, and household loans also increased. In January of this year, the transaction volume declined to 62,000 households, but so far, the price of leased property has increased and the burden on the households related to housing continues.

From the second half of last year, the phenomenon of’debt investment’ in which debt was invested in stocks was also on fire. As a result, credit loans have risen sharply. Last year, other loans, including credit loans, increased by 32.4 trillion won, more than doubled from the previous year (15 trillion won).

It is fortunate that the increase in February loans declined from January, but it is too early to judge this as a long-term decline in household loans. It is analyzed that the decline in credit loans in February was influenced by the stock market showing a sideways guarantee and the company’s incentives and payment of rice cakes. Although the heat in the real estate market has cooled down somewhat, it has become more difficult to predict the future situation due to the departure of employees of the Korea Land and Housing Corporation (LH). Even if the home sales market stabilizes, the burden of jeonse prices remains.

Despite the steep rise in household loans, it is unlikely that a major problem will arise immediately thanks to low interest rates and government financial support policies. The delinquency rate for other household loans including credit loans in February was 0.37%, up 0.04 percentage points from the end of the previous month. However, it is 0.1 percentage points lower than a year ago, and the mortgage loan delinquency rate (0.14%) remained at the level at the end of the previous month.

An official from the Financial Supervisory Service said, “The delinquency rate usually falls a little at the end of the quarter when the amortization and sale of delinquent bonds is concentrated, and then tends to rise in the next month, the beginning of the quarter.”

However, experts say that countermeasures need to be prepared from a long-term perspective.

So-young Kim, a professor of economics at Seoul National University, said, “I don’t think that exceeding 1,000 trillion won in household loans will be a big problem right away, but it is worrisome that it is continuing to increase.”

Professor Kim advised, “I believe that debt will increase in the future as the government is providing liquidity at a low interest rate.

Seong Tae-yoon, a professor of economics at Yonsei University, said, “Even though the government is blocking the total amount of loans, the increase in household loans is a cause for concern.” “There may be a situation that is unfortunate.” Professor Sung feared that falling asset prices and increasing household burdens could cause problems for the national economy.

Reporters Um Hyung-jun, Nam Jung-hoon, and Kim Hee-won [email protected]

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