SEJONG, Dec. 20 (Korea Bizwire) – South Korean household debt rose in 2016 from a year earlier as people borrowed money from banks and other financial companies to buy homes, and invest in real estate and businesses, government data showed Tuesday.
The average household debt was tallied at 66.55 million won (US$56,000) as of end-March this year, up 6.4 percent from a year earlier, according to data compiled by Statistics Korea.
Of the total, 70.4 percent, or 46.86 million won, was financial loans, up 7.5 percent on-year, with the rest in security deposits that must be paid back down the line.
Among those who have financial loans, 40.3 percent said they borrowed money to buy homes, 21.1 percent said they borrowed money for their businesses and 18.8 percent for real estate investment.
Of those households that have financial loans, 70.1 percent said paying back both principal and interest is burdensome, unchanged from the previous year.
Of those households that feel burdened by the need to pay principal and service their debts, 74.5 percent said they cut their savings, investments and spending, according to the data.
The data also showed that 64.5 percent of all South Korean households had debt, down 0.1 percentage point from the previous year.
Total debt held by households was 18.4 percent of their assets as of end-March this year, up 0.4 percentage point. Meanwhile, financial debt accounted for 67.5 percent of all savings, up 4.6 percentage points on-year.
South Korea’s overall household debt reached a record high of 1,295.8 trillion won as of end-September, according to official data.
The Financial Services Commission, South Korea’s financial regulator, has said that a tougher screening of borrowing qualifications will be expanded to group mortgage loans for newly built apartment purchases and lending by nonbank financial companies.
The data of Statistics Korea also showed that an average South Korean household held 361.87 million won worth of assets as of end-March this year, up 4.3 percent from a year earlier.
An average South Korean household earned 48.83 million won in 2015, up 2.4 percent from a year earlier.
The data showed that 46.9 percent of those aged over 65 fall under the poverty line, which stands at 11.88 million won. Some 20 percent of those surveyed said they had no preparations for their retirement, they showed.
Statistics Korea said it carried out a joint survey on 20,000 households across the country from Jan. 1, 2015, to March 31, 2016.