S. Korean policymakers vow to control rising household debt

SEOUL  – South Korea’s policymakers vowed to take measures to control consumer debt as the country’s household credit grew at the fastest pace in 1-1/2 years in the second quarter on rising mortgage demand.

Total household credit stood at 1,862.8 trillion won ($1.39 trillion) at the end of June, up 0.5 percent, or 9.5 trillion won, from three months before, central bank data showed on Tuesday.

It marked the fastest percentage gain since the last quarter of 2021, after two consecutive quarterly losses and following a record 0.8 percent drop in the preceding three months.

Bank of Korea (BOK) Governor Rhee Chang-yong said at a parliamentary session on Tuesday that policymakers would take micro as well as macro measures to control household debt, and that it would be problematic if the rising trend continued.

Rhee’s comments come two days before the BOK meets for its August policy review, at which the central bank is expected to leave interest rates unchanged for a fifth consecutive meeting.

Finance Minister Choo Kyung-ho also said the government would continue implementing strict policy to manage the debt.

Mortgage loans increased 14.1 trillion won in the second quarter, more than triple the increase of 4.5 trillion won in the previous quarter, with a recovery in house transactions, the BOK said in a statement, while the decline in other loans also softened to 4.0 trillion won from 15.5 trillion won.

South Korea’s house prices rose in July for the first time in 14 months, separate data showed last week, as regulations eased and following the introduction of a policy loan to support the market.

Total credit was still down 0.3 percent on an annual basis, after a 0.5 percent fall in the March quarter.

($1 = 1,341.5000 won)