SEOUL, Korea, Mar 28 (Korea Bizwire) – As it is getting harder to pay back mortgages, more households are feeling themselves as “house poor.”According to a report by the Korea Housing Institute, the number of Korean households which feel difficulty in repaying the debt from buying their houses, dubbed as “house poor,” was estimated to 2.48 million last year, up 7 percent, or 170,000 homes, from the previous year’s 2.31 million.
The institute reported that people tend to regard themselves “house poor” when their ratio of mortgage payments to disposable income exceeds 20 percent.
Especially, 43.1 percent of the house-poor families have taken out home equity loans and other credit loans besides their mortgages and their average non-mortgage loan balance reached 13.6 million won in 2013, some 3-million-won increase from the previous year.
A researcher at the institute said that as the house-poor families could easily fall into the trap of using more credit loans with higher interests as it becomes harder to maintain their daily expenses while repaying the mortgages.
Nearly 2.5 million Korean households consider themselves ‘house poor’ (Arirang, Mar 27)
Household debt – Korea’s Achilles’ heel (Korea Times, Mar 3)
S.Korea restructures home loan rules to ease debt threat (Reuters, Feb 27)
He said, “Until now, the government’s policies for house-poor families focused on the high-risk households by measures like household credit recovery or partial sale of house equity. But we need to think about macroeconomic level measures like lowering the interest rate for the house-poor families in order to boost the domestic consumption.”
It is also urged to relieve the restriction on the rates on the loan-to-value ratio (LTV) and the debt-to-income ratio (DTI), which are currently fixed at 60 percent. The researcher said, “If the rate is adjusted upward to 70 percent, the households will reduce their interest burden by 300,000 to 400,000 won a year.”
Written by John Choi (email@example.com)