SEOUL, May 23 -- South Korea's household debts hit a new record high on a so-called "balloon effect" in which households moved to high-rate loans amid a tightened standard for bank loans, central bank data showed Tuesday.
Household credit, which includes loans by banks and non-bank institutions as well as purchase on credit, reached 1,359.7 trillion won (1.2 trillion U.S. dollars) as of end-March, according to the Bank of Korea (BOK).
It was the largest-ever since the bank began compiling the data in 2002. The figure was up 1.3 percent from three months earlier.
The country's household debts kept a record-breaking trend amid the record-low interest rate. The BOK lowered its benchmark seven-day repurchase rate from 3.25 percent in July 2012 to an all-time low of 1.25 percent in June last year.
The previous government encouraged households to purchase new home with borrowed money as part of efforts to reinvigorate the lackluster economy with the bubble-forming in the real estate market.
The balloon effect emerged as the financial regulator tightened bank loans amid a danger signal in the property market. Households moved to non-bank institutions, including savings banks, mutual credit and community credit cooperatives, to borrow money.
Bank loans reached 618.5 trillion won as of end-March, up 1.1 trillion won from three months earlier.
Loans by non-bank deposit takers expanded 7.4 trillion to 298.6 trillion won in the same period.
Purchase on credit grew 0.3 trillion won to 73 trillion won in the cited period.
