Closed wallets, paid off debts…biggest drop in household debt on record

In the first quarter of this year, households closed their wallets and continued to pay down debt as high interest rates continued to rise.

The result was the largest drop in household debt on record.

But it’s unclear whether the trend will continue, as lending has recently started to stumble again.

Reporter Jisun Kim reports.

At the beginning of the year, when various investment and consumption plans are being made, the mood was high to pay off debts first.

[Kim Tae-un / Yeongdeungpo-dong, Seoul (last January) : The interest rates on loans have gone up so much that I think paying off the loans first will stop me from spending the cash I have now on other things….]

As a result, household debt, which had been snowballing, shrank by a record amount in the first three months of this year.

Household credit balances stood at 1,853.9 trillion won in the first quarter of this year, according to the Bank of Korea.

That’s down 13.7 trillion won, more than three times the largest drop ever.

The amount of loans households received from financial institutions fell by 10.3 trillion won.

Although mortgage loans actually increased by KRW 5.3 trillion to set a new record for the largest balance due to housing policy instruments,

15.6 trillion in other loans, including credit with relatively high interest rates.

Sales credit, the amount of card debt not yet paid off, fell for the first time in nine quarters.

That’s because people spent nearly 3 trillion won less on cards per capita, and fewer people took advantage of interest-free installment plans.

Amid high interest rates, citizens are closing their wallets and paying off loans, tightening their belts.

[Lee In-cheol / CEO, Korea Economic Research Institute] Credit loans are mainly used by people who have secured credit among office workers, and suddenly the interest rate on their loans doubles, and if they don’t use it, the banks automatically reduce (the limit).

It’s unclear if this big drop in household debt will continue.

Household bank loans increased slightly last month as lending rates have fallen a lot recently, and personal credit card usage is also on the rise again먹튀검증.

[Park Chang-hyun / Head of Financial Statistics Department, BOK : Real estate transactions are also showing signs of recovery, so loan rates and asset market flows such as real estate will be important factors….]

Given these flows, the BOK predicts that the shrinkage of household debt will slow down somewhat in the second quarter.

I’m Kim Ji-sun of YTN.

Leave a Reply

Your email address will not be published. Required fields are marked *