SEOUL, April 6 (Reuters) - South Korea’s central bank on Thursday said elevated household debt could be restraining private consumption, especially as borrowing costs are rising.
“Looking at research papers on household finances, welfare, and other related studies at home and abroad, its possible household debt may already be capping consumption,” the Bank of Korea said in a statement prepared for a parliamentary subcommittee meeting.
South Korea’s household debt grew at its fastest pace in over a decade in the fourth quarter as borrowers continued to take advantage of record-low interest rates.
Household debt, including loans and other debt owed by South Korean households, soared 11.7 percent in the October to December period from a year earlier, to 1,344.3 trillion won ($1.19 trillion), up from a revised 11.3 percent growth in the third quarter, BOK data showed.
That was the fastest since a record 11.8 percent jump in the fourth quarter of 2006.
The BOK said increased borrowing costs expected with rising U.S. interest rates will worsen interest payment burdens for South Koreans, but household debt was not expected to become a systemic risk. ($1 = 1,127.0100 won) (Reporting by Cynthia Kim; Editing by Eric Meijer)