Surplus funds among S.Korean households tumble on rush to buy home

Surplus funds owned by South Korean households tumbled to the lowest in at least 11 years as people rushed to purchase new homes amid record-low interest rates and eased mortgage regulations, central bank data showed on Wednesday.

Surplus money among households and nonprofit organizations, which refers to assets minus borrowed money, stood merely at 1.9 trillion won (1.6 billion U.S. dollars) in the July-September quarter, according to the Bank of Korea (BOK).

The third-quarter figure is equivalent to about 13.5 percent of the seond-quarter surplus funds that reached 14.1 trillion won. It marked the lowest since the bank adopted a new measure in the second quarter of 2005.

The sharp fall was attributable to households' rush to buy new homes. The BOK cut its benchmark rate from 3.25 percent in July 2014 to an all-time low of 1.25 percent in June this year.

The financial regulator had eased regulations on mortgage financing, encouraging households to buy new homes with borrowed money. During the third quarter, 77,000 households bought new apartments.

The dropping surplus funds bolster worries that private consumption may abruptly drop in the near future amid growing debt-servicing burden for households.

Household debts have kept a record-breaking trend. The expected three rate hikes in the United States would put pressure on the BOK to raise its policy rate, resulting in growing pressure on households here to repay debts. Endit