(LEAD) Household credit hits record high in second quarter but grows at slower pace amid high borrowing costs

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SEOUL, Aug. 23 (Yonhap) — South Korean household credit hit a record high in the second quarter of this year, but its year-on-year growth has slowed for four consecutive quarters due to strict lending regulations and rising borrowing costs, according to central bank data Tuesday.

Outstanding household credit had reached 1.869.4 trillion won ($1.39 trillion) at the end of June, up 6.4 trillion won from three months earlier, according to preliminary Bank data. of Korea (BOK).

This is the largest amount on record since related data began to be compiled in 2003.

Household credit refers to purchases of credit and loans granted to households by financial institutions.

Of total outstanding loans, household loans stood at 1.757.9 trillion won at the end of June, up 1.6 trillion won from three months earlier. Purchases on credit also rose by 4.8 trillion won over the same period to 111.4 trillion won, the data showed.

In particular, mortgage loans totaled 1,001.4 trillion won, up 8.7 trillion won from the previous quarter. Other loans outstanding, including unsecured loans, fell 7.1 trillion won in the quarter to 756.6 trillion won.

Year-on-year, total household credit outstanding rose 3.2 percent, the data showed.

The year-on-year growth rate has continued to slow since the second quarter of last year, when outstanding credit grew by 10.5%. It also slowed after expanding 5.4% year-on-year in the first quarter of this year.

The slower pace of the year-on-year increase is attributable to tight lending regulations as the government wants to keep household debt in check, which had been rising rapidly amid the pandemic.

Rising market rates in line with central bank monetary tightening has also added to the debt burden for many households, raising concerns about its negative impact on consumption and the broader economy.

Last month, the BOK raised its policy rate by 0.5 percentage points, the biggest and the sixth rate increase since August last year. The central bank is expected to offer a rate hike of a quarter of a percentage point at a meeting on Thursday.

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