Interest Burden on Jeonse Households Increased... Exceeding 200,000 Won per Month on Average

Largest Increase After Aggregating Interest Expense Statistics
Impact of High Interest Rates... Phenomenon of Interest Surpassing in Owner-Occupied Households

The average monthly interest cost for Jeonse households has exceeded 200,000 won for the first time. This represents the largest increase since related statistics began to be compiled.

According to the National Statistical Portal of Statistics Korea on the 27th, the average monthly interest cost per Jeonse household in the second quarter of this year was 214,000 won, an increase of 86,000 won (67.4%) compared to the same period last year. Interest costs refer to the total amount of interest paid by households on mortgage loans, credit loans, Jeonse deposit loans, student loans, and other loans.

This is the largest increase since Statistics Korea began compiling related statistics in the first quarter of 2019. It is also the first time that the average monthly interest cost for Jeonse households has exceeded 200,000 won.

The interest costs for Jeonse households showed single-digit growth in the third and fourth quarters of 2021, but surged by 22.1% in the first quarter of last year, marking the start of a steep upward trend continuing through the second quarter of this year. The average monthly interest cost was around 102,000 won in the fourth quarter of 2021, but it more than doubled in a year and a half, reaching the 200,000 won range.

The sharp rise in interest costs for Jeonse households is analyzed to be due to the high interest rates that began in earnest last year. Since Jeonse households have a higher proportion of loan holdings compared to owner-occupied households, they were more directly affected by the interest rate hikes.

[Image source=Yonhap News]

Additionally, the high proportion of relatively high-interest loans such as credit loans and card loans among Jeonse household loans is also considered a cause.

According to the Household Financial Welfare Survey released in December last year by Statistics Korea, the Bank of Korea, and the Financial Supervisory Service, the average financial debt of Jeonse households was 79.42 million won. This is similar to owner-occupied households (82.5 million won), but the proportion of non-collateral loans such as credit and card loans was 25.3%, higher than that of owner-occupied households (16.0%).

Accordingly, the phenomenon of Jeonse household interest costs surpassing those of owner-occupied households is becoming more pronounced.

Until 2021, the interest costs for Jeonse households were generally similar to or lower than those of owner-occupied households. However, in the first quarter of last year, they exceeded the interest costs of owner-occupied households, and by the second quarter of this year, the gap widened to 70,000 won.

Although early loan repayments increased significantly as interest rates rose rapidly last year, there is speculation that Jeonse households, which generally have lower incomes compared to owner-occupied households, were less able to reduce their loans.

A Statistics Korea official said, “The sample of owner-occupied households includes relatively more households without loans compared to Jeonse households, so the average increase in interest costs may appear less pronounced.”

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