[Bank of Korea Financial Stability Report] Youth Household Loans Up 8.5%... "Caution Advised on Steep Growth"

[Asia Economy Reporter Kim Eun-byeol] Household loans among young people in their 20s and 30s are increasing at a faster rate compared to other age groups. This is due to a surge in loan demand driven by the 'Youngkkeul (borrowing to the limit)' and 'Bittu (investing with loans)' trends. As asset prices soared due to increased liquidity in response to the COVID-19 pandemic, young people took out loans this year to increase their investments.

On the 24th, the Bank of Korea stated in its "2020 Second Half Financial Stability Report" that "As of the end of the third quarter, household loans among young people increased by 8.5% year-on-year, growing faster than other age groups (6.5%)."

This is largely attributed to the 'Youngkkeul' and 'Bittu' craze centered on young people this year. A Bank of Korea official explained, "It appears to be the result of a combination of demand-side factors such as increased demand for monthly rent and home purchases, expanded demand for stock investments, and supply-side factors including the expansion of non-face-to-face credit loans accessible to young people and support for monthly rent loans for young tenants."

Although household loans among young people are rising sharply, the Bank of Korea believes their debt repayment burden is not yet significant.

The loan-to-income ratio (LTI) for young people rose sharply to 221.1% as of the end of September. However, the debt service ratio (DSR), which measures principal and interest repayments relative to income, fell significantly to 35.6%, showing a downward trend compared to other age groups since 2017.

A Bank of Korea official explained, "For young borrowers, the proportion of bank loans with relatively low interest rates is high, and the increase is mainly in jeonse deposit loans where only interest is paid." This means that although loans are increasing rapidly, the interest rate levels and repayment burdens are lower compared to other age groups.

Accordingly, the delinquency rate for household loans among young people was 0.47%, lower than that of other age groups (0.71%).

A Bank of Korea official advised, "The increase in household debt among young people is not yet a major concern," but cautioned, "If the recent rapid growth continues, attention should be paid to the possibility of weakening debt repayment capacity."

This content was produced with the assistance of AI translation services.