SEOUL, May 24 (Yonhap) — South Korean household credit declined for the first time in about a decade in the first quarter of this year amid rising borrowing costs and strict lending rules, revealed this Tuesday the data of the central bank.
Outstanding household credit stood at 1,859.4 trillion won ($1.47 trillion) at the end of March, down 600 billion won from three months earlier, according to preliminary data from the Bank of Korea (BOK).
It was the first quarterly decline since the first quarter of 2013. The contraction also contrasts with the revised 17.1 trillion won rise recorded three months earlier.
Household credit refers to credit purchases and loans extended to households by financial institutions
Outstanding household loans stood at 1.752.7 trillion won at the end of March, down 1.5 trillion won from three months earlier, the data showed. This is the first quarterly decline since the relevant data began to be compiled in 2002.
Among household loans, mortgages stood at 989.8 trillion won at the end of March, up 8.1 trillion won from three months earlier. But the growth was slower than the 12.7 trillion won rise in the previous quarter amid slowing real estate transactions, the BOK said.
The decline in household credit is attributed to rising borrowing costs alongside central bank efforts to tighten monetary policy to control inflation. In April, the BOK raised its key rate by a quarter of a percentage point – the fourth increase since August last year – to 1.5%.
Strict government lending rules put in place to curb rising household debt, which emerged as a potential risk factor for the economy, also contributed to the decline.