South Korea’s Household Borrowing Rises

SEOUL (Reuters) – South Korea’s household borrowing increased in August by the largest amount in over three years, driven by a record surge in mortgage demand, as reported by the central bank on Wednesday.

At the end of August, household borrowing from banks amounted to 1,130.0 trillion won ($840.52 billion), reflecting a 9.3 trillion won increase over the month, marking the largest monthly rise since July 2021.

Mortgage loans soared by 8.2 trillion won, the highest increase since data tracking began in 2004, according to the Bank of Korea (BOK).

During a meeting with local banks on Tuesday, the financial watchdog expressed concerns regarding the swift rise in household debt, warning that such financial imbalances could pose systemic risks. The head of the watchdog called on banks to improve risk management following tightened lending rules earlier in the month.

A BOK official mentioned that household debt growth is anticipated to slow in September due to government actions and banks’ management efforts but acknowledged that August data were influenced by temporary factors.

The Financial Services Commission indicated that if the housing market continues to escalate or household debt growth quickens, authorities will implement additional measures promptly and decisively.

Recent board meeting minutes from the central bank revealed that members were cautious about lowering interest rates, citing worries about increasing financial stability risks despite a slowdown in inflation.

($1 = 1,344.4100 won)