South Korea government holds emergency meeting on household debt

South Korea’s financial regulator:

• South Korea government holds emergency meeting on household debt
• South Korea govt strengthens measures to control household debt

The back story on this is that South Korea has one of the highest household debt-to-income ratios among OECD countries. Households owe significantly more than their annual disposable income.

• mortgage loans are a major component of household debt
• mortgage loan growth has been influenced by eased lending policies and rising property prices, particularly in Seoul

The South Korean government has tightened borrowing rules and been promoting fixed-rate, amortizing loans. Looks like further moves are in the works.

The high level of household debt can affect the Bank of Korea’s (BOK) ability to adjust interest rates, as rapid rate cuts could incentivize further borrowing. The high household debt levels can make households more vulnerable to economic shocks, such as interest rate hikes or economic downturns, potentially leading to financial instability.

South Korea, Seoul

This article was written by Eamonn Sheridan at www.forexlive.com.