South Korea’s household debt grew at the slowest pace in six years in the first quarter from the previous three months following the government’s introduction of a slew of tighter regulations on household loans to rein in speculative housing bubble.

According to the Bank of Korea on Wednesday, household outstanding credit totaled 1,540 trillion won ($1.29 trillion) as of the end of March, up 3.3 trillion won from the end of December last year. It is the lowest on-quarter gain since the first quarter of 2013 when household debt was down 900 billion won.

Household credit refers to household debt that includes household loans from financial institutions such as banks, insurers, private lenders, and public financial institutions as well as credit card spending before payment.

From a year earlier, household credit increased 4.9 percent, or 71.8 trillion won, in the first quarter ended March, also marking the lowest growth since the 4.7-percent addition in the fourth quarter of 2004.

Outstanding household credit surged as high as 11.6 percent on year in the fourth quarter of 2016 when the country’s key interest rate fell to as low as 1.25 percent, and the government lifted restrictions on property transaction. Since then its growth has slowed down steadily.

The growth in household debt further slowed down after the current government had introduced multiple measures to curb snowballing household loans along with the booming property market. The government toughened screening rules for mortgage loans at banks by introducing the debt service ratio (DSR) rule as a management index in October last year. Under the rule, banks are required to keep risk loans to 15 percent or below and high-risk loans 10 percent. Coupled with other regulatory measures to lower household debt, housing transactions in the country have declined significantly since late last year.

The number of overall housing transactions fell 68,000 units from 213,000 units in the fourth quarter of last year to 145,000 units in the first quarter. New apartment units for sale also fell to 53,000 units from 72,000 units over the same period.

Although on-year household credit gain slowed down in the first quarter, it still accelerated at a faster pace than last year’s 3.9 percent gain in household income. It also climbed faster than Korea’s nominal gross domestic product (GDP) growth of 3.0 percent last year.

By Lee Yu-sup and Lee Eun-joo

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