Debt to buy a house, debt to avoid debt ‘vicious circle’… Household Debt Bomb Critical Point

Last month, household loans from all banks reached 1,062 trillion won, the largest ever, and household loans continue to rise in July. Thanks to the easing of real estate-related regulations and the ‘lower housing price’, the housing mortgage loans (shared loans) of the five commercial banks (KB Kookmin, Shinhan, Hana, Woori, NH Nonghyup) increased by about 1 trillion won from the previous month for two consecutive months, and household loans in the entire financial sector are expected to increase for the fourth month in a row .

The financially underprivileged were driven to ‘blocking credit card loans’ at an annual interest rate of 14%, and the balance of such ‘card replacement loans’ swelled by nearly 50% within a year. It is pointed out that special measures are needed to prevent a ‘time bomb’ in our economy from exploding, as the monetary authorities have virtually no capacity to respond by raising the base rate even if household debt rises.

According to the financial sector on the 23rd, the balance of household loans as of the 20th of the 5 major commercial banks was 678.57 trillion won, an increase of 324.6 billion won from the end of June (678.2454 trillion won). The balance of household loans at the five major commercial banks continued to decline compared to the previous month from January of last year to April of last year.

The increase in household loans was led by mortgage loans. As of the 20th, the balance of the main mortgage loan, including the jeonse loan스포츠토토, increased by 938.9 billion won from the previous month to 512.3397 trillion won. Considering the remaining business days following an increase of 1.7245 trillion won in June, it is highly likely to increase by more than 1 trillion won for two consecutive months. According to the Financial Services Commission and the Financial Supervisory Service, household loans in the financial sector continued to increase for three consecutive months from April (+200 billion won), May (+2.8 trillion won), and June (+3.5 trillion won), and the rate of increase also increased. Considering this trend, it is expected that household loans across the entire financial sector will increase month-on-month in July as well.

On the other hand, as the cold wave of lending to the financially vulnerable becomes more severe, the demand for credit card replacement loans that re-loans to delinquent card loans used as an emergency window for the common people is rapidly expanding. According to the Credit Finance Association, the balance of refinancing loans from seven major credit card companies (Shinhan, Samsung , KB Kookmin, Hyundai, Lotte, Woori, and Hana Card) increased by 48.0 percent from the same period last year (903.2 billion won) to 1,337.2 billion won as of last month. This means that the number of people with low credit who borrowed high-interest loans from credit card companies and are unable to pay them back on time has increased significantly.

Looking at the growth rate of refinancing loans by card company during the same period, Lotte Card showed a whopping 540.9%, Woori Card 81.2%, Hyundai Card 65.5%, KB Kookmin Card 45.3%, Shinhan Card 22.9%, and Samsung Card 13.4 % . The interest burden is also not easy. The average interest rate on card loans from these seven card companies was 14.10 percent per year as of last month.

Monetary authorities have expressed concern several times over the recent trend of rising household debt. Nevertheless, he was in a dilemma situation where he continued to make hawkish remarks, but was unable to respond hawkishly due to the economic slowdown and financial instability. The Bank of Korea Monetary Policy Committee froze the base rate at 3.50% on the 13th and mentioned ‘household debt’ as a variable in determining the base rate, but Governor Chang-yong Lee said, “If you try to adjust (household debt) rapidly in the short term, unintended side effects may appear.” The Bank of Korea emphasizes the need to reduce household debt through macroprudential regulations, such as reducing exceptions to the total debt service ratio ( DSR ).

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