According to a recent report, one in three South Koreans has borrowed money to buy a house, a statistic that is said to be one of the main reasons behind the ballooning household debt in South Korea.
The report says that as of June this year, 18.57 million of Korea's 51.25 million population had borrowed 1,439 trillion won. This makes the average amount of debt 77.47 million won. Just over one year ago, the total debt was 1,224 trillion won.
Out of this number, 6.22 million of those in debt had taken out loans in the form of a mortgage which averaged 150.74 million won.
More homes = more debt
Unsurprisingly, the amount of debt grew significantly for those who owned multiple homes. People with multiple homes were estimated to have an average debt of around 220.94 million won. This is despite the fact that the report suggested the average income level was not noticeably greater than those with just one home.
This has led some to believe that one of the key reasons for this increase in household debt is that speculators are taking out significant loans to buy second homes that they see as investments or as second homes for their children.
However, high household debt has been cited by the Bank of Korea as one of the biggest risks facing Korea's financial system.
They say that an increase in the interest rate of only 2.5 percent could end up in a 3.7 percent rise in the debt service ratio which could make significantly more people susceptible to defaulting on their loans.
Luckily, the government has spotted the danger in this and one of President Moon's key pledges has been to manage household debt that he blames on ex-president Park Geun-hye and her party's policy of loosening restrictions on mortgages.
In fact, the government is soon expected to announce a new set of household measures that would increase the loan regulations on those with more than one house. This comes after measures have already been taken in Busan and Seoul that limit the amounts of the house's overall price that people can get in a loan.
By making mortgages, especially those for second homes, harder to get, President Moon hopes to reduce the rapidly rising amount of household debt without making buying a first home more difficult than it already is.
ⓒ Jeju Weekly 2009 (http://www.jejuweekly.com)
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