The number of "high-risk households" struggling to repay loans with income and assets rose 19% to 459,000 as of Mar. last year, the Bank of Korea (BOK) said on the 26th. That is about 4% of all households with financial liabilities. Financial liabilities held by high-risk households also jumped 33% to 96.1 trillion won.
On the 26th, the Bank of Korea (BOK) released its Financial Stability report. The Bank of Korea (BOK) releases data each Mar. and Sep. analyzing whether its policy goal of financial stability is being met. According to the report, as of Mar. last year, high-risk households increased 18.9% year over year to 459,000. Their share among households with financial liabilities rose from 3.2% to 4.0%.
High-risk households are those for whom it is difficult to repay debt with income and assets. The Bank of Korea (BOK) classified as high risk the households whose debt service ratio (DSR) exceeds 40% of annual income and whose debt-to-asset ratio (DTA) exceeds 100% of total assets.
Financial liabilities held by high-risk households surged 33% from 72.2 trillion won in Mar. 2024 to 96.1 trillion won in Mar. last year. Their share of total financial liabilities also jumped from 4.9% to 6.3%. The Bank of Korea (BOK) said, "It appears to be due to the continued slump in regional real estate and the sustained repayment burden as the scale of liabilities has risen rapidly despite a decline in household lending rates."
◇ Surge in the share of young people among high-risk households over 5 years, 22.6% → 34.9%
The average total assets of high-risk households stood at 270 million won, less than half that of non-high-risk households (640 million won). By contrast, liabilities were 240 million won, higher than non-high-risk households (160 million won).
Among assets, the share of lease deposits was 13.8% for high-risk households, higher than 6.4% for non-high-risk households. That is because 72.4% of high-risk households live in jeonse or monthly rentals, higher than 34.3% for other households. On the liabilities side, the share of credit loans, which carry relatively higher interest rates, was 19.1%, higher than 10.4% for non-high-risk households.
By age, people in their 40s and 50s accounted for the largest share of high-risk households at 53.9%. Next were people in their 20s and 30s at 34.9%, and those 60 and older at 11.2%. According to the Bank of Korea (BOK), the share of young people among high-risk households surged from 22.6% in 2020 to 34.9% last year compared with other age groups. The Bank of Korea (BOK) said, "Since COVID, young people with relatively lower income levels and asset accumulation have taken on debt to buy homes and invest in stocks, which appears to have driven a large increase in high-risk households."
Even among high-risk households, the average net worth gap between the top 20% and bottom 20% by income widened to 140 million won. It has more than tripled from 40 million won in 2020. The Bank of Korea (BOK) said, "As prices of some assets have continued to rise recently and the base rate has been cut, the ability of high-risk households to repay debt is improving." It added, "However, as the number of young high-risk households is increasing rapidly and the recovery of the regional dwellings market is being delayed, the repayment burden could expand significantly."