S.Korea warns of fast household debt growth, financial risks

SEOUL, Sept 20 (Reuters) - South Korea’s central bank warned on Thursday that household debt was growing much faster than the Organization for Economic Cooperation and Development average as large mortgages and high rents drive up indebtedness.

“Since the end of the global financial crisis, South Korea’s household debt growth has significantly exceeded that of the OECD, and the trend will continue,” the Bank of Korea (BOK) said in a financial stability report.

Debt-to-disposable income at South Korean households was at 161.1 percent in the second quarter, up from 159.8 percent at the end of 2017, the report showed.

Total household debt stands at 1,493.2 trillion won ($1.33 trillion) as of the second quarter, up 7.6 percent from a year earlier.

The BOK also warned that the number of households vulnerable to debt default is increasing as their debt-servicing capacity is stretched by rising interest rates and low wage growth.

Rising interest rates in the United States have driven up South Korean borrowing costs, leaving households little cash for discretionary spending as they are squeezed by large mortgages and high rents in a red-hot property market. ($1 = 1,119.1000 won) (Reporting by Cynthia Kim Editing by Eric Meijer)