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Household debt growth seen accelerating in March ahead of tougher rules

By Yonhap
Published : April 3, 2018 - 10:57
The growth of household debt appears to have accelerated last month as households took out more loans ahead of tougher mortgage rules, industry data showed Tuesday.

Household loans provided by the five major banks, including Kookmin Bank and Shinhan Bank, rose by 3.06 trillion won ($2.89 billion) in March on a monthly basis, according to the data.

It was the sharpest monthly growth since November last year, when it grew by 4.6 trillion won.


(Yonhap)


The government has implemented a series of measures to control the growth of household debt and cool the overheated property market in Seoul.

Some market watchers attributed the March growth in household loans to an upcoming rule that will further tighten guidelines for mortgage loans.

Currently, people's repayment ability for home mortgages is calculated on a ratio that measures home mortgage principal and interest payments as a proportion of their annual income.

The stricter lending rule for home mortgages, named the Debt Service Ratio by the financial authorities, will use a new ratio that measures all debt principal and interest payments as a proportion of annual income.

Financial authorities have said the DSR system will better assess a borrower's repayment ability and reduce the risk of default.

Top-tier banks will soon implement the DSR system on a trial basis.(Yonhap)

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