Delinquency rate among Koreans in their 20s hits record high in June

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South Korean financial consumers in their 20s are struggling to pay back debt, with the delinquency rate of housing mortgage loans among those under 30 reaching an all-time high in June.

According to data obtained by Representative Yang Kyung-sook of the Democratic Party from the Financial Supervisory Service on Monday, the delinquency rate for individuals under 20s stood at 0.44 percent at the end of June, marking the highest since the third quarter of 2018 when the financial regulator began compiling related data.

The data is based on an analysis of loans from 19 commercial, regional, and online banks.

“The delinquency rate is estimated to be at an all-time high given the surge in loans and delinquencies among individuals in their 20s over the past five years due to surging real estate prices and low interest rates,” said an official from a commercial bank.

The delinquency rates for those in their 30s, 40s, 50s, and 60s and older, in the meantime, came to 0.17 percent, 0.21 percent, 0.20 percent, and 0.21 percent, respectively, during the cited period.

Normally, as the outstanding loan balance increases, the delinquency rate tends to decrease. However, the delinquency rate for individuals in their 20s has risen as their debt has increased.

The outstanding balance for mortgage loans among individuals under 20s reached 34.25 trillion won ($26.19 billion) at the end of June, 2.54 times higher than 13.47 trillion won at the end of September 2018.

During the same period, the delinquent amount for the same age group jumped 7.5 times to 150 billion won from 20 billion won.

The delinquency rate for mortgage loans among those aged 19 and below, in particular, stood at 20 percent as of the end of June, which is nearly 100 times the delinquency rate for all ages.

The delinquency rate for those aged 19 and below, which was zero percent until the end of the first quarter of 2022, has surged since the end of the second quarter of last year when it was 12.5 percent.

Most of the mortgage loans taken out by those aged 19 and below are from the Korea Housing Finance Corporation’s guarantee program for youth rental deposits and monthly rent.

This program aims to support young people aged between 19 and 34 in providing rental deposits and rent, offering loans even to those with no income.

According to an official from a commercial bank, many students or non-regular workers take out loans to secure rental housing such as one-room apartments.

Since they lack stable employment and have little understanding of finance and credit, the delinquency rate is bound to surge, the official said.

Experts emphasize the need for thorough loan and repayment management for youth loans.

“Many individuals in their 20s are unable to repay loans because their income streams are weak,” said Sung Tae-yoon, a professor of economics at Yonsei University. “It would be better to provide financial support to young people with low income through government finance and to provide loans to people with a certain level of income.”