It was found that the number of high-risk households that struggle to repay liabilities even after selling assets was nearly 390,000 last year. Their financial liabilities exceeded 72 trillion won.
According to the 'Financial Stability Situation (March)' report published by the Bank of Korea on the 27th, the number of high-risk households last year was 386,000, accounting for 3.2% of all households with financial liabilities. Their financial liabilities amounted to 72.3 trillion won, making up 4.9% of the total financial liabilities held by households.
High-risk households are defined as those that hold financial liabilities and have a debt service ratio (DSR, repayment amount ÷ disposable income) exceeding 40%, indicating a heavy repayment burden, and a debt-to-asset ratio (DTA, total liabilities ÷ total assets) also exceeding 100%, making it difficult to repay liabilities through asset sales.
The proportion of high-risk households and the proportion of their financial liabilities have decreased compared to 2023 (3.5% and 6.2%, respectively), but are still at high levels compared to 2022 (2.6% and 3.8%, respectively). When compared to the long-term average from 2017 to 2024 (3.1% and 5.6%, respectively), the proportion of households is lower while the proportion of financial liabilities is higher.
Last year, the upper quartile values of DSR and DTA for high-risk households were recorded at 75% and 150.2%, respectively, indicating a significant decline in their capacity for debt repayment regarding income and assets. The upper quartile values for high-risk households in rural areas were reported at 70.9% and 149.7%, while those in the metropolitan area were recorded at 78.3% and 151.8%.
The Bank of Korea projected that as housing prices decline, the number of high-risk households in rural areas could increase. Based on the projections reflecting the market's expectations for the benchmark interest rate and housing prices this year, the estimated proportions of high-risk households (based on financial liabilities) were 5.4% for rural areas and 4.3% for the metropolitan area at the end of last year. By the end of this year, it is expected that the proportion in rural areas will rise to 5.6%, while it will decrease to 4.0% in the metropolitan area, widening the gap between rural and metropolitan areas.
The Bank of Korea noted, 'Given that the economic growth in rural areas is sluggish compared to the metropolitan area, and considering the recent decline in housing prices in rural areas, there is a possibility that the debt repayment burden for high-risk households in rural areas may increase.' It emphasized the need to closely monitor developments and the effectiveness of government responses to prevent the risk of deterioration centered around high-risk households in rural areas.