A mid-2017 stock, and why the account was worried then

As of the end of June 2017 Korea's household debt was about 1,400 trillion won, then a record. In the first half of that year, the rise relative to GDP was the second fastest among 43 major countries. Over the previous fifteen years the stock had more than tripled. From 2015 it had grown by an average of about 129 trillion won a year, faster than disposable income, so the ratio of debt to disposable income had risen sharply. Those figures stay in 2017. They are not treated here as this year's official totals.

The causes, as the account lists them, belong to that same moment: a long stretch of low rates and easier financial policy, which lowered the cost of borrowing; a rise in monthly rent that pushed some tenant households to take a mortgage and become owners, adding about 20 trillion won; more retired people investing in shops and officetels for income; easier reconstruction rules, a simpler subscription system, and the end of a sale-price cap, which pulled money into housing; and a larger group of active borrowers aged 35 to 59, plus demand from older people for rental housing. Tighter rules on banks had a balloon effect: lending grew in the less closely managed second-tier financial sector. The chance that household debt would become a financial-system risk was, in the analysis the account reports, still limited. A ratio of household debt to GDP above 80 percent, it also warns, can hurt long-term growth. That warning is that account's, from that period.

October 24, 2017, and two tools dated to 2018

When the stock had already passed 800 trillion won the government had issued three earlier packages: in 2011, mainly rules for financial firms, including how branches were evaluated and how loan-to-deposit ratios were managed; in 2015, qualitative rules, with targets for fixed rates and amortized repayment; in 2016, tighter management of group loans and, for the first time, measures for financially weaker households. After those steps, the rise in mortgages was said to have shrunk by about 10 trillion won. On October 24, 2017 a new comprehensive plan followed. Its three aims, as the account tells them, were tailored support for vulnerable borrowers, risk management on the volume side, and a structural response. Seven core tasks included credit recovery, support for the self-employed, a reform of lending rules, and more public rental housing.

Vulnerable borrowers were put at about 320,000 households and about 94 trillion won. If repayment was already hard before a delinquency, principal could be deferred for up to three years. About 70 percent of households, the account said, felt burdened by principal and interest and were cutting spending. A rate rise was estimated to add about 60,000 high-risk households and about 15 trillion won in financial debt. New DTI, from January 2018, was to apply to new loans, to count the full principal-and-interest burden of existing mortgages, and to check income over the previous two years. DSR, from the second half of 2018, was to include principal and interest on all loans, and, as the account states it, to be used only as a soundness indicator for financial firms. That is the 2018 design the discussion describes, not a later, tighter use of DSR. The 1,400 trillion won, and the October 24 plan, stay in mid-2017.

Sources

1. the state and causes of household debt in Korea, and on the comprehensive plan announced on 24 October 2017, including new DTI from January 2018 and DSR from the second half of 2018. Stock and growth figures are as of mid-2017.

Last updated: 14 November 2026