Recent deregulatory measures have potential to raise debt levels even further: AnalystUpdated: 2014-09-01 06:35:07 KST
Korea's household debt has not only hit another high, standing at over one-trillion U.S. dollars in the second quarter, the upward trend is the exact opposite of what's happening in developed nations, which have seen their debt levels decline since the 2008 financial crisis, due to a focus on lowering debt levels.
According to the Bank of Korea on Sunday, the national debt rose from 714 billion U.S. dollars to 1 trillion U.S. dollars at the end of last year, putting Korea high on the OECD's list of highly indebted nations.
Korea's debt has grown by an average of 8.2 percent per year from 2008 to 2013, while that of countries like Germany and the UK have shrunk by 0.5 percent and Japan's shrank 1 percent.
Financial experts say households in developed nations have either filed for bankruptcy or paid off their debt, but that Korea's household debt threatens to keep rising.
The upward trend is attributed to a recent set of measures that relaxed mortgage lending regulations but could spur household loan growth.
In addition, the Bank of Korea lowered the interest rate by a quarter percentage point in its August session to 2.25 percent, which is the first such cut since May 2013.
The government believes the pace of household loan growth is not yet cause for alarm, as the new measures have also helped pick up the housing market.
But experts like Standard & Poor's analyst Ritesh Maheshwari say the growing debt poses risks to the banking sector, as there's more debt than disposable income.
Kwon Soa, Arirang News.
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