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S.Koreas household debts post double-digit growth in 3.5 years

Xinhua, October 4, 2016 Adjust font size:

Household debts in South Korea posted a double-digit growth in the past three and a half years as Bank of Korea (BOK), the countrys central bank, cut borrowing costs to a record-low level, central bank data showed on Tuesday.

According to data submitted by the BOK to Rep. Yun Ho-jung of the main opposition Minjoo Party, average debts owed by households to lenders amounted to 72.06 million won (65,280 U.S. dollars) as of end-June.

It was up 23.8 percent from 58.19 million won tallied at the end of 2012. The average household debt jumped as the BOK cut its benchmark interest rate from 3.25 percent in July 2012 to an all-time low of 1.25 percent in June this year.

Under the Park Geun-hye government, household debts surged as the financial regulator eased regulations on mortgage financing amid the lowered borrowing costs.

Former Finance Minister Choi Kyung-hwan and BOK Governor Lee Ju-yeol have been under criticism as the eased regulations and lower borrowing costs are interpreted as a signal of purchasing homes with borrowed money.

Households borrowing money from more than two lenders posted an average debt of 93.35 million won as of end-June, up 29.5 percent from 72.06 million won at the end of 2012.

The fast increase boosts worry about the debt-servicing capability among so-called multiple borrowers, which usually move to lenders demanding higher lending rates from commercial banks due to their lower credit ratings. Endit