Credit: Public domain.
Compared to its peer countries, South Korea has very high household debt - 206% of net disposable income, clocking in at sixth place among OECD countries. Much of the household debt, 54%, is mortgage loans, exposing Korean households to a severe credit risk when interest rates rise and property values fall.
Household debt climbed yet again in August, rising by KRW 6.2t (USD 4.68b) over July, fueled by the new 50-year mortgage introduced in July. More than KRW 6.7t (USD 5.06b) in 50-year mortgages was disbursed in July and August - often in mortgages taken out by older investors attempting to buy the dip in the real estate market.
Alarmed by the sudden increase, the finance regulators summoned the major banks on August 31 to restrict the issuance of 50-year mortgages.
