Korea’s household debt hit record with a rise of $5.4bn in June mortgages

[Image source: Gettyimagesbank]

South Korea’s household debt in May saw the largest growth in one year and nine months as mortgage loans have increased with a rebound in the real-estate market amid a rollback of regulations.

The Bank of Korea said on Wednesday that the household loans held by the country’s banks amounted to 1062.3 trillion won ($829.2 billion) at the end of June, up 5.9 trillion won from May. The debt balance reached a record after three months of growth since April.

The factor behind the surge was mortgage loans, which marked the highest gain of 7 trillion won in June since 2020.

“The trading volume in the housing market has shown a sign of recovery from last year’s weak performance, amid an easing of governmental tightened restrictions on housing mortgages, all of which led to greater demand for funds for housing purchases among borrowers,” said an unnamed official from the central bank.

The recent rise in new apartments and growing loans for housing release called jeonse contributed to the increase in mortgages. The jeonse loans rose by 100 billion won in June alone, after seven months of decline.

“A majority of the increase involved loans for purposes such as living expenses, not for purchasing houses,” according to a source from financial authorities, adding that “though the authorities do not see the rising household debt as a warning sign, they may come up with measures if necessary.”

Other loans, including loans on credit, marked 19 straight months of decline in June, with a plunge of 1.1 trillion won. The balance of corporate debt held by commercial banks rose by 5.5 trillion won in the month to 1210.1 trillion won.

Bank deposits climbed by 38.4 trillion won in June. Most of the increase, 37.1 trillion won, came from money market deposits, as funds deposited with banks by companies increased in the end month of the fiscal quarter.