A 30s Individual Who Saved Money to Buy a House and Pay Jeonse/Monthly Rent Faces the Largest Increase in Debt... "Suffering Under a Mountain of Debt"

Average Debt of Household Heads in Their 30s 111.9 Million KRW
30s Have the Highest Share of Jeonse Loans Among 5 Major Banks

[Asia Economy reporters Kwangho Lee and Hyojin Kim] The age group that led the surge in household debt, considered a ticking time bomb for the Korean economy, was people in their 30s. This is attributed to excessive borrowing to cover jeonse and monthly rent deposits due to the frenzy of real estate, stock, and cryptocurrency investments, including Yeongkkeul (borrowing to the limit) and Debt Investment (borrowing to invest), as well as the rapid rise in housing prices.

Amid a sharp interest rate hike trend, concerns are growing that the debt repayment ability of young people with weak financial soundness may deteriorate, prompting calls for interest burden relief measures and careful exit strategies.

According to the '2021 Household Financial Welfare Survey' jointly conducted by Statistics Korea, the Bank of Korea, and the Financial Supervisory Service on the 17th, as of the end of March this year, the average debt of household heads in their 30s was 111.9 million won, an 11.0% increase from 100.82 million won the previous year. Debt among people in their 30s surpassed 100 million won for the first time last year and recorded the only double-digit growth rate among all age groups this year.

Im Kyung-eun, head of the Welfare Statistics Division at Statistics Korea, analyzed, "The increase in the proportion of jeonse and monthly rent deposits held and the significant rise in stock, bond, and fund holdings among people in their 30s influenced this trend."

In fact, although people in their 40s have the highest debt at 122.08 million won among all age groups, the gap is narrowing as debt among those in their 30s is increasing more rapidly. Last year, debt among people in their 40s was on average 12 million won higher than those in their 30s, but this year the gap has narrowed to about 10 million won.

About 84% of the debt held by households in their 30s, equivalent to 94.04 million won, was financial debt. Among this, the average mortgage loan amount was 74.25 million won, surpassing the 71.63 million won of those in their 40s, making it the largest among all age groups.

According to the office of Jeong Un-cheon, a member of the National Assembly's Planning and Finance Committee from the People Power Party, as of the end of June, the scale of jeonse deposit loans from the five major commercial banks?KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup?reached a record high of 148.5732 trillion won. Among all age groups, people in their 30s accounted for the largest share at 42.8%, with 63.6348 trillion won. This was followed by those in their 40s (36.376 trillion won), 20s (24.3886 trillion won), and 50s (17.2969 trillion won).

The problem is that while debt is increasing, loan interest rates continue to rise. When the Bank of Korea raises the base interest rate, market interest rates also rise, increasing the interest burden on households with loans. Currently, about 75% of household debt consists of variable interest rate loans. If variable interest rate loans account for about 75% of the average 94.04 million won financial loans among people in their 30s, a 1 percentage point increase in interest rates would raise annual interest payments by about 700,000 won.

According to Yoon Doo-hyun, a member of the National Assembly's Political Affairs Committee from the People Power Party, if personal loan interest rates increase by 1 percentage point, the interest burden is estimated to increase by 11.8 trillion won.

Multiple Debts as a 'Time Bomb' Amid Increasing Interest Burden

In particular, the proportion of young people among multiple debtors (those with loans from three or more financial institutions) has increased significantly, further raising the risk of household debt defaults. At the end of last year, the loan balance of young multiple debtors surged by 16.1% year-on-year to reach 130 trillion won.

Experts advise that addressing these issues urgently requires a comprehensive review of the economic and corporate environment, including youth employment issues. They argue that short-term financial policies that simply manage or suppress loans cannot fundamentally solve the problem.

Professor Sung Tae-yoon of Yonsei University's Department of Economics pointed out, "As labor market rigidity intensifies and the economy contracts, young people, who need to work actively to generate income, inevitably suffer significant damage, leading to a stronger tendency to rely on loans to resolve financial difficulties."

Professor Kim Dae-jong of Sejong University's Department of Business Administration emphasized, "The actual youth employment rate in Korea remains around 45%, and the prospects for expanding youth jobs are diminishing. The best policy to alleviate the increasing financial burden on young people is to create many quality jobs."

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