SEOUL, April 20 South Koreans who have lost
their jobs or gone out of business will be allowed to delay
repaying principal on their loans for up to three years,
starting from the second half of this year, the Financial
Services Commission (FSC) said in a statement.
The plan aims to reduce the debt burden on some of the
country's most vulnerable households as borrowing costs rise.
The FSC will require banks and financial institutions to
implement the changes within this year so that qualifying
borrowers can refinance their debt if they wish.
For households with mortgages to qualify for delayed
repayment, the property they own must be valued at 600 million
won ($525,000) or less, and they will still need to make
The Bank of Korea's eight cuts in benchmark interest rates
since 2012 to the current rock-bottom 1.25 percent have prompted
a borrowing binge that has sent household debt to a record high.
In the fourth quarter of last year household debt soared
11.7 percent from a year earlier to 1,344.3 trillion won, the
fastest pace in over a decade, as borrowers continued to take
advantage of record-low interest rates.
But home loans and credit extended to households grew at a
slower pace in the first quarter of this year compared to a year
earlier, the FSC said, without disclosing the total amount
While risks stemming from rising household debt are expected
to stabilize going forward, the debt-servicing capacity of
low-income households may fall as market interest rates rise,
the regulator said.
($1 = 1,140.7000 won)
(Reporting by Cynthia Kim; Editing by Eric Meijer)