S. Korean Policymakers Commit to Addressing Rising Household Debt – Reuters

SEOUL (Reuters) – South Korea’s policymakers have pledged to implement measures aimed at controlling consumer debt as household credit surged at its quickest rate in a year and a half during the second quarter, driven by an uptick in mortgage demand.

By the end of June, total household credit reached 1,862.8 trillion won (approximately $1.39 trillion), marking a 0.5% increase, or 9.5 trillion won, compared to the previous three months, according to central bank data released on Tuesday. This increase represents the fastest percentage growth since the last quarter of 2021, following two successive quarterly declines and a record drop of 0.8% in the prior three months.

During a parliamentary session on Tuesday, Bank of Korea Governor Rhee Chang-yong indicated that policymakers would adopt both micro and macroeconomic measures to address household debt concerns, warning that an ongoing increase in debt levels could pose significant issues.

Rhee’s statement comes just days before the Bank of Korea’s meeting for its August policy review, where it is anticipated that interest rates will remain unchanged for the fifth consecutive time.

Finance Minister Choo Kyung-ho also reiterated the government’s commitment to enforcing stringent policies to manage rising debt levels.

In the second quarter, mortgage loans rose by 14.1 trillion won, significantly higher than the 4.5 trillion won increase noted in the previous quarter, attributed to a rebound in housing transactions. Meanwhile, the decline in other types of loans eased to 4.0 trillion won, compared to a decrease of 15.5 trillion won in the previous period.

Additionally, separate data revealed that South Korean house prices increased in July for the first time in 14 months, following the relaxation of regulations and the introduction of a policy loan to support the housing market.

Despite these increases, total household credit remains down 0.3% year-over-year, following a 0.5% decline in the March quarter.

(Exchange rate: $1 = 1,341.5000 won)