Household, corporate debts see record growth in March

South Korea’s household and corporate debts saw unprecedented growth last month, data from financial authorities showed Wednesday, as risks stemming from the novel coronavirus continue to weigh on the economy.

Bank loans extended to local households, including state-backed mortgage loans, increased by 9.6 trillion won ($7.88 billion) on-month to 901.9 trillion won, the Bank of Korea said. It is the highest figure since the BOK started keeping records on household debt in 2004.

The corresponding volume of household loans extended in February saw a 9.3 trillion won increase on-month.

Of the loans, mortgages offered to households increased by 6.3 trillion won in the cited period.

Outstanding household loans also increased by around 5.6 percent on-year in March, according to separate data released by the policymaking Financial Supervisory Service.

The BOK cited increased interest in real estate and stock investments as some of the catalysts behind the latest surge in household debt.

The government announced tough real estate regulations late last year -- dubbed the Dec. 16 measures -- to rein in a surge in housing prices, which included stricter lending rules for home purchases.

The measures took effect in January, but the BOK hinted that the waves had not actually hit the market as of March.

“The government’s Dec. 16 measures fundamentally work as a restrainer to household loans,” the central bank explained.

“However, it seems the decline in growth was (minimal) as housing transactions around the metropolitan areas continued,” it added.

Loans extended by banks to local companies increased by 18.7 trillion won on-month to 901.4 trillion won last month, the BOK data also showed. This was the largest figure since the central bank started compiling corporate loan data in June 2009.

Of the growth in corporate debts, loans extended to conglomerates saw a 10.7 trillion won increase while those extended to small and medium-sized businesses saw an 8 trillion spike in the cited period.

“Large corporations needed to boost their capital requirements and secure liquidity while the SMEs were affected by the government and the banking sector’s support,” the BOK said.

The government last month doubled its support for SMEs, similar businesses and self-employed businesspeople through state-backed guarantees and loans to 58.3 trillion won.

“From April, household loans are projected to continually expand due to inevitable growth factors including growth in loan demand over COVID-19,” the FSC said.

By Jung Min-kyung (mkjung@heraldcorp.com)