Fri, 22 Sep 2023

SEOUL, March 23 (Xinhua) -- South Korea's debt-servicing burden for households hit a four-year high in the fourth quarter of last year on the back of rapid interest rate hikes, a central bank report said Thursday.

The debt service ratio (DSR) among household borrowers, or the ratio of principal and interest payments to income, averaged 40.6 percent in the October-December quarter, according to a financial stability report from the Bank of Korea (BOK).

It topped 40 percent in four years since the fourth quarter of 2018 amid higher borrowing costs.

The BOK began to tighten its monetary policy stance in August 2021, raising its policy rate by 3.0 percentage points to 3.50 percent.

The DSR for households who took out new loans in the fourth quarter was 17.3 percent, compared to 23.8 percent in the fourth quarter of 2020, the quarter before adopting stricter regulations on the DSR.

However, the DSR for most borrowers with existing loans rose from 33.8 percent to 38.4 percent in the cited period due to interest rate increases, the BOK noted.

The percentage of households with the DSR surpassing 70 percent came in at 15.3 percent of the total in the fourth quarter.

The proportion of households with the DSR exceeding 100 percent reached 8.9 percent, indicating that one in 11 household borrowers paid more principal and interest than the income.

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