"Can't you buy a house without a loan?"...30s and 40s debt hits record high

Household debt among people in their 30s and 40s in the capital region is reaching record highs, and the burden of borrowing to purchase homes continues to grow.

According to the Bank of Korea and Democratic Party Rep. Moon Jin-suk of the National Assembly's Special Committee on Economy and Finance on the 28th, the average household loan balance per borrower in their 40s in the capital region was 139.77 million won as of the end of the second quarter this year. This is a 76.1% increase from 79.39 million won in the first quarter of 2013, marking the highest on record since the statistics were compiled.

During the same period, the average loan balance for people in their 30s in the capital region more than doubled from 54.67 million won to 123.17 million won. The loan balance for people in their 40s in the capital region has increased for 14 consecutive quarters from the first quarter of 2023, and those in their 30s also reached record high levels.

The borrowing burden in Seoul was even greater. The average loan balance for borrowers in their 40s in Seoul was 152.65 million won, an 89.1% increase from 2013. Those in their 30s in Seoul also increased 2.32 times during the same period, from 54.93 million won to 127.54 million won.

The age groups concentrated with household debt have also changed. In 2013, those in their 50s and 60s and older ranked first and second in average loan balances in the capital region, but from the end of 2018, those in their 40s rose to first place. Those in their 30s also surpassed those in their 50s starting from the first quarter of 2021, becoming the second age group with the most debt.

Mortgage loans are at the center of the loan increase. On a nationwide basis, the average balance of mortgage loans held by borrowers in their 30s was 234.19 million won in the second quarter this year, 2.67 times the 87.81 million won in 2013. Those in their 40s also increased 1.94 times from 95.95 million won to 185.86 million won.

In fact, the proportion of those in their 30s stood out in new mortgage originations. According to the Bank of Korea's second quarter household debt statistics by borrower, those in their 30s accounted for 43.7% of new mortgages, the highest among all age groups. Those in their 40s also accounted for 24.5%, bringing the combined share of the two age groups to 68.2%.

Housing prices continue to rise. According to apartment price trends for the third week of October released by Korea Real Estate Board, apartment sales prices in Seoul rose 0.13% from the previous week, marking 89 consecutive weeks of increases. Gyeonggi Province also rose 0.21%, while Suwon recorded the highest growth rate at 0.40%.

With loan rates also rising, the repayment burden on households is increasing. The average interest rate for new mortgage loans at deposit banks in August was 4.66% annually, rising for four consecutive months and reaching the highest level since November 2022.

Assuming a loan of 200 million won at an annual rate of 4.66%, the monthly interest alone amounts to approximately 780,000 won. When principal is repaid together, the monthly burden becomes even larger. This is a considerable burden on households in their 30s and 40s where housing costs and childcare expenses are concentrated.

However, the scale of new loans has recently declined somewhat due to regulatory effects. In the second quarter of this year, the average new mortgage origination per borrower was 208.29 million won, a decrease of 21.1 million won from the previous quarter. The total household loans across the financial sector announced by financial authorities in September also decreased by 2.2 trillion won from the previous month. However, mortgage loans increased by 3.3 trillion won during the same period, leaving the accumulated burden of housing-related debt intact.

Rep. Moon Jin-suk said, "Since debt is concentrated during the time when people purchase homes and raise children, the interest burden could lead to a contraction in consumption. We need to assess the repayment capacity by age group and establish measures to manage household debt."