Household Debt in Q4 Reaches 1,726 Trillion Won... Largest Ever Since Credit Loan Statistics Began

Bank of Korea Announces '2020 Q4 Household Credit (Preliminary) Statistics'
Other Loans Reach Record High... "Increased Demand for Stock and Real Estate Funds"

On the 2nd, dealers were busy working in the dealing room of Hana Bank in Euljiro, Seoul. On this day, the KOSPI index started at 3,065.56, up 9.03 points (0.30%) from the previous trading day, showing an upward trend. Photo by Moon Honam munonam@

[Asia Economy Reporter Jang Sehee] Due to the economic downturn caused by COVID-19, along with loans resulting from retail investors' stock investments and housing transactions, household credit balance in the fourth quarter of this year (October to December) reached 1,726.1 trillion KRW. The increase amounted to 44.2 trillion KRW, significantly expanding compared to the same period last year (27.8 trillion KRW).

According to the '2020 4th Quarter Household Credit (Provisional)' statistics released by the Bank of Korea on the 23rd, as of the end of December, the household credit balance stood at 1,726.1 trillion KRW, showing a substantial increase following the previous quarter's 44.6 trillion KRW rise.

Looking at the entire last year, the increase totaled 125.8 trillion KRW, the largest since 2016 (139.4 trillion KRW). Household credit refers to the comprehensive debt of Korean households, including loans (household loans) from financial institutions such as banks and insurance companies, as well as credit card usage (sales credit).

Among these, the household loan balance increased by 44.5 trillion KRW from the previous quarter to 1,630.2 trillion KRW. By sector, deposits banks, non-bank deposit-taking institutions, and other financial institutions each increased by 29.9 trillion KRW, 6.6 trillion KRW, and 8.9 trillion KRW respectively.

By product, the increase in other loans expanded significantly. Other loans, mostly consisting of unsecured loans, rose by 24.2 trillion KRW due to demand for funds related to stock investments and housing transactions. This is the largest increase since statistics began in 2003.

A Bank of Korea official explained, "Other loans have increased significantly due to not only housing fund demand but also stock fund demand and living expenses related to COVID-19."

The sales credit balance decreased by 200 billion KRW to 95.9 trillion KRW. Regarding the impact of the Debt Service Ratio (DSR) regulation, the Bank of Korea official stated, "The government announced additional DSR regulations on November 13," adding, "The specific effects of the measures are expected to appear after March."

Meanwhile, according to the household loan management plan announced in November last year, if a high-income borrower with an annual income exceeding 80 million KRW has a total unsecured loan amount exceeding 100 million KRW, a DSR regulation of 40% (60% for non-bank sectors) applies per borrower. Additionally, if a borrower who has received unsecured loans exceeding 100 million KRW purchases a house in a regulated area within one year, the unsecured loan will be recalled.

This content was produced with the assistance of AI translation services.