Household debt in S. Korea grows 6.8 percent

The average household debt in South Korea grew 6.8 percent over the past year, a report showed Tuesday, spawning concerns about households' debt-servicing capacity amid weak income growth.

Korean households held an average of 58.18 million won ($55,116) in debt as of end-March, up from 54.50 million won the previous year, according to the report jointly made by Statistics Korea, the Financial Supervisory Service and the Bank of Korea.

Household debt here refers to financial debt and key money for renting houses.

The report showed that the portion of indebted households accounted for 66.9 percent of the total as of end-March, up 1.8 percentage points from the previous year.

The report came as the high indebtedness of households is the main bugbear for Korean policymakers as it is feared to crimp consumer spending, putting a damper on economic growth. Korea's household credit, credit purchase and borrowing from financial firms totaled 980 trillion won as of end-June.

The capacity of households to repay debt worsened this year as debt grew at a faster pace than disposable income, the report showed.

The ratio of financial debt against disposable income came in at 108.8 percent as of end-March, up from 106 percent from the previous year. Financial debt gained 7.7 percent on-year while disposable income grew 4.9 percent on-year in March.

The growth of household debt picked up this year as the government unveiled measures to boost the sagging property market by offering tax benefits for home purchases.

Meanwhile, financial assets of Korean households averaged 325.6 million won as of the end of March, up 0.7 percent from a year ago. (Yonhap News)