On Tuesday, figures from the Bank of Korea (BOK) revealed that South Korean household credit had dramatically increased in the second quarter of the year, despite high interest rates, due to an upsurge in home purchases.
At the end of June, total household credit had reached 1,862.8 trillion won (US$1.38 trillion), a rise of 9.5 trillion won from three months earlier. This figure includes credit purchases and loans to households from financial institutions.
The surge in household debt occurred in spite of the BOK’s multiple interest rate hikes, implemented to regulate inflation. In some cases, the relaxation of residential buying restrictions also helped boost household credit.
The BOK raised its key interest rate to 3.5 percent in January, marking the seventh consecutive increase since April of last year. However, since then, the central bank has kept the rate static due to slowing inflation and a slowing economy. This week, the BOK is anticipated to remain unchanged.
Out of the total credit, household loans stood at a record high of 1,748.9 trillion won at the end of June, an increase of 10.1 trillion won from three months earlier. Mortgage loans rose by 14.1 trillion won in the second quarter, while other types of household loans decreased by 4 trillion won.
This file photo, taken Oct. 3, 2021, shows information on a bank's loan programs on the exterior of a lender in Seoul. South Korea's financial regulator is reviewing further tightening rules on household loans in a bid to curb the fast growth of household debt. (Yonhap)