Household, self-employed debt raises alarm as BOK lifts key rate to 3%
The Bank of Korea's (BOK) recent decision to raise its policy rate to 3 percent is raising concerns over the financial stability of already vulnerable borrowers, including the self-employed and households, analysts said Sunday. Self-employed debt and delinquency rates have climbed to record highs, while total household credit has surpassed 2,000 trillion won ($1.45 trillion) for the first time.…
Recent central bank action to increase the policy rate to 3 percent has sparked worries about the financial health of already struggling borrowers, including the self-employed and households, according to analysts. The Bank of Korea's (BOK) decision has pushed self-employed debt and delinquency rates to all-time highs, while total household credit has now reached 2,000 trillion won ($1.45 trillion) for the first time.
A large portion of these loans feature variable interest rates, meaning that higher borrowing costs could exacerbate the difficulties of vulnerable borrowers and raise the risk of defaults.
The central bank's benchmark rate was raised by 0.25 percentage points to 3 percent during Thursday's policy meeting, signaling the second consecutive rate hike following the increase in July. This move is expected to disproportionately affect self-employed borrowers, as both outstanding debt and delinquent loans have hit record levels, with delinquency rates climbing to alarming heights. This could further increase the interest burden for these borrowers and heighten the likelihood of defaults.
One borrower remarked, "My loan interest rate is already at 6 percent."
Written by urgent.news from The Korea Times's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
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