[Debt-Ridden Youth] Moon Administration's 20s Mortgage Loans Surge 111%... Concerns Over 'Bad Debt Bomb'

20s Youth Borrow 32 Trillion Won via Mortgage Loans
Variable Rate Loans Estimated at About 70% Share
Increased Default Risk for Youth Due to Interest Rate and Asset Volatility

[Image source=Yonhap News]

[Asia Economy Reporters Kwangho Lee, Seungseop Song] Since the launch of the Moon Jae-in administration, the number of people in their 20s taking out housing-related loans from banks has surged. As the mentality of get-rich-quick schemes spreads and debt-financed investing (debt investment) leads many to jump into stocks and cryptocurrencies, concerns are rising that the youth will be the first to be hit hard when interest rates rise.

According to the "Status of Housing Mortgage Loan Balances by Age Group at Domestic Banks" submitted by the Financial Supervisory Service to Yoon Doo-hyun, a member of the National Assembly's Political Affairs Committee from the People Power Party, housing mortgage loans for those in their 20s, which stood at 15.2 trillion won at the end of 2018, surged 111.1% (16.9 trillion won) to 32.1 trillion won as of the end of April. Compared to the same period, loans for those in their 30s increased by 32.0%, and those in their 40s and 50s rose by 14.5% and 8.9%, respectively, indicating that people in their 20s have recklessly taken on debt to purchase their own homes.

The total housing mortgage loan balance also approached 600 trillion won. Housing mortgage loans, which were 493.6 trillion won at the end of 2018, reached 599.2 trillion won as of the end of April. The problem is that loan interest rates have been rising recently. It is estimated that variable-rate loans account for 70% of the total housing mortgage loan balance. As loan interest rates rise, the burden of interest repayment inevitably increases, and the delinquency of the youth, whose debt has rapidly increased, could become a "weak link."

The sharp volatility of risky assets such as stocks and cryptocurrencies also appears to increase the risk of insolvency among young people. As of the first half of last year, more than half of the 7.23 million new stock accounts opened at six major securities firms belonged to people in their 20s and 30s. Their credit loan balances surged 55% compared to the end of the previous year. According to the cryptocurrency exchange Bithumb, as of the end of January, the proportion of cryptocurrency investors in their 20s and 30s was 32.9% and 29.1%, respectively. This is why there are concerns that failed debt-financed investing could lead to a large number of credit delinquents.

Representative Yoon pointed out, "Due to the Moon Jae-in administration's flawed real estate policies, panic buying among the youth occurred, and the debt rapidly increased amid the boom in risky asset investments," adding, "Once interest rate hikes begin, there is a risk that insolvency will spread due to the deterioration of the youth's loan repayment ability."

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