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Default-prone household debts reach 25.6 tln won: data
By Kim Seung-yeon
SEOUL, Dec. 2 (Yonhap) -- The amount of mortgages in South Korea at risk of turning sour reached 25.6 trillion won (US$236.3 million) in September, with the majority being owed to non-banking firms that charge higher interest rates, the financial regulator said Sunday.

   The figure represents 230,000 out of a total of 5.35 million mortgage borrowers here, accounting for 4.8 percent of the total home-backed loans extended by local financial institutions, according to the Financial Supervisory Service (FSS).

   "The percentage itself may yet seem small but it's a significant figure considering most of these mortgages were borrowed by the low-credit group," said Yang Hyun-geun, an FSS director.

   The mortgage debts with high default risks refer to those owned by so-called "multiple borrowers," who have taken out a loan from more than three different non-banking firms such as savings banks, insurance or credit card companies.

   In Korea, the interest rate of mortgages extended by savings banks stands at an average 10-13 percent per year, twice the rate offered by banks. Insurers and credit card firms' rates for home loans hover around 4-5 percent annually, but the bulk of the debts are extended upon selling subordinated bonds, which don't guarantee investor protection in the event of default.

   Of the high-risk debts, 98.8 percent came from such non-banking firms, the FSS data showed.

   The watchdog noted the potential default risks in the low-credit group are increasing, as their ability to repay the debts in time has weakened on a decline in property values, stemming from an economic slowdown.

   The FSS said it plans to look deeper into delinquent mortgages and those feared for default due to their falling property prices. The watchdog added it will continue its efforts to prevent what could turn into a spiral of personal bankruptcies among the multiple mortgage borrowers by helping with debt restructuring plans.

   The total outstanding amount of home-backed loans in South Korea came to 394.9 trillion won as of end-October, of which 21 percent was non-banking firms' loans, according to the regulator.