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S. Korea to unveil additional measures next month to curb household debt

All News 10:51 September 27, 2021

SEOUL, Sept. 27 (Yonhap) -- South Korea plans to unveil additional measures next month to curb household debts, the head of the financial regulator said Monday.

Financial Services Commission (FSC) Chairman Koh Seung-beom said such measures will focus on improving ways of calculating a household's ability to repay debts.

Koh said the government will continue to take stricter measures to rein in household debts, calling such debts the "biggest potential risk" on the nation's economy.

Since July, the FSC has applied stricter lending calculations for mortgage loans, called the debt service ratio (DSR). The DSR measures how much a borrower has to pay in principal and interest payments in proportion to his or her yearly income.

FSC Chairman Koh Seung-beom speaks at a meeting with economists on Sept. 27, 2021. (Pool photo) (Yonhap)

Household credit reached a record high of 1,805.9 trillion won (US$1.54 trillion) in June, up 41.2 trillion won from three months earlier, according to the central bank data.

The second-quarter tally compared with a 37.6 trillion-won on-quarter rise in the first quarter.

The growth has shown no signs of letting up as more people have taken out loans to buy homes amid skyrocketing housing prices. Demand for unsecured loans also remains high amid a boom in stock investments.

In August, the BOK delivered its first pandemic-era rate hike to tackle rising inflation and rein in surging household debts, ending 15 months of record low interest rates amid signs of improvements.

It marked the first rate increase since May last year, when the BOK cut the key rate to a record low of 0.5 percent.

Earlier this month, the BOK said it will gradually adjust its monetary easing as it seeks to meet its inflation target of 2 percent for this year amid signs of a robust recovery from the COVID-19 pandemic.


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