Household Debt Rises Despite High Interest Rates

Household debt surpassed W1.8 quadrillion in the third quarter of this year to reach a record high despite soaring interest rates, mainly due to increased credit card use (US$1=W1,353).

The Bank of Korea said Tuesday that total household debt stood at W1.87 quadrillion as of the end of September, up another W2.2 trillion since the second quarter.

Household debt includes loans from banks, insurers and other financial institutions and credit card spending before settlement.

Loans did decline by W300 billion from the previous quarter to W1.76 quadrillion as interest rates rose, only the second time ever that Korea saw a quarterly decline. The last time was in the first three months of the year, when they dwindled by W800 billion.

Housing loans, which account for more than half of household loans, increased by W6.5 trillion on-quarter to W1 quadrillion, but the rate of increase slowed due to rising interest rates and a slowdown in the real estate market.

Other loans fell by W6.8 trillion to W748.9 trillion. They have been declining since the fourth quarter of 2021.

"Loan interest rates are a growing burden, prompting more people to use their disposable income to repay their debt," a BOK official said.

But credit card spending jumped W2.5 trillion on-quarter to a record W113.8 trillion as more people used their plastic after lockdown was lifted earlier this year.

Overall, household debt growth slowed from a W133.4 trillion increase in 2021 to a W7.7 trillion rise until this third quarter.