Household Interest Burden Reaches Record High Due to High Interest Rates

Statistics Korea Q1 2023 Household Trends Survey Results
Interest Expenses Increased 42.8% to 111,000 Won Due to Rising Interest Rates
Largest Ever Growth Rate in Interest Expenses

As high interest rates continue, the burden of household interest expenses has increased at an unprecedented rate. Decrease in surplus amount

According to the '2023 Q1 Household Trends Survey Results' released by Statistics Korea on the 25th, the average monthly interest expense per household in the first quarter rose 42.8% year-on-year to 111,000 KRW. The growth rate of interest expenses recorded the largest increase ever on a quarterly basis since statistics including single-person households began in 2006.

It is analyzed that the interest expenses borne by households have increased due to the continuation of the high interest rate trend since last year. Lee Jin-seok, head of the Household Income and Expenditure Trends Division at the Social Statistics Bureau of Statistics Korea, explained, “The household loan interest rate was 3.25% in Q1 last year, but it rose to about 26% in Q1 this year,” adding, “Because the overall loan scale is large, the cost burden due to the interest rate hike is increasing.”

Real household income adjusted for inflation remained stagnant. The average monthly nominal income per household in Q1 was 5,054,000 KRW, up 4.7% year-on-year and surpassing 5 million KRW for the first time ever, but real income was the same as the previous year. Lee explained, “Compared to the same period last year, nominal income increased by 4.7%, but the consumer price index also rose by the same amount, so there was no change in real income.”

The average monthly consumption expenditure per household was 3,885,000 KRW, an increase of 11.1% year-on-year. Due to the endemic effect, the average monthly consumption expenditure per household (2,822,000 KRW) increased by 11.5% compared to the same period last year. Spending increased significantly in food and accommodation (21.1%), transportation (21.6%), entertainment and culture (34.9%), and housing and utilities (11.5%). This reflects the recovery of suppressed consumer sentiment as the COVID-19 phase ended and daily life resumed. Lee said, “In the case of entertainment and culture, both domestic and overseas group travelers have increased significantly, and spending has increased accordingly.” However, spending on food and non-alcoholic beverages (-2.9%) decreased.

The average monthly income of households in the first income quintile was 1,076,000 KRW, up 3.2% year-on-year, while the income of the fifth quintile was 11,483,000 KRW, up 6.0%, worsening income distribution indicators. The first quarter’s equivalized disposable income 5th quintile ratio was 6.45 times, up 0.25 points from 6.20 in the same period last year. It widened by 0.92 points compared to the previous quarter (5.53). Income inequality is increasingly deepening.

The disposable income of first quintile households increased by 1.3% to 858,000 KRW, while that of fifth quintile households rose 4.7% to 8,869,000 KRW.

The household surplus amount, calculated by subtracting consumption expenditure from disposable income, was 1,169,000 KRW, down 12.1%. In particular, the deficit of first quintile households decreased by 47.2% year-on-year to 461,000 KRW, marking the largest decline since statistics began in 2006.

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