2023-12-28 18:02:16
Due to the effects of high interest rates and economic slowdown, the proportion of vulnerable borrowers who lack the ability to repay loans among the self-employed is increasing, and the delinquency rate is also rising rapidly.
According to the Bank of Korea’s ‘Financial Stability Report for the Second Half of 2023’ on the 28th, the loan balance of self-employed people in the third quarter of this year (July-September) recorded KRW 1,052.6 trillion, a 3.8% increase from a year ago.
However, due to sluggish service industry conditions and increased interest repayment burden, the number of self-employed people who are unable to repay money on time is increasing. The self-employed loan delinquency rate was 1.24% at the end of the third quarter, up 0.55 percentage points from 0.69% at the end of last year. Although it is still lower than the long-term average of 1.7% from 2012 to 2019, it is a cause for concern that the self-employed loan delinquency rate continues to rise. The proportion of loans held by delinquent borrowers among all self-employed loans was 2.47% at the end of the third quarter, up 1.13 percentage points from 1.35% at the end of last year.
The proportion of vulnerable borrowers among self-employed borrowers is also increasing. A vulnerable borrower refers to a person who is a multiple borrower who has borrowed money from several financial companies and has low income or low credit. The proportion of vulnerable borrowers among self-employed borrowers in the third quarter of this year was 12.4% (389,000 people), an increase from 11% at the end of last year.
Meanwhile, as consumption patterns shift to non-face-to-face consumption such as online, domestic commercial real estate is also showing sluggish performance. The Bank of Korea analyzed, “It is unlikely that commercial real estate-backed loans will go bad on a large scale in the short term, but the level of potential risk appears to be higher than in the past.”
The Bank of Korea said it is necessary to pay attention to the rapidly rising delinquency rate of non-bank financial companies’ commercial real estate mortgage loans. The bank’s commercial real estate mortgage loan balance amounted to 298 trillion won in the third quarter of this year, an increase of 70.6% compared to the end of 2017. However, in the case of non-banks, the growth rate was even steeper, with the balance of mutual finance loans increasing by 114.1% from KRW 104 trillion to KRW 223 trillion over the same period. The non-bank commercial real estate delinquency rate stood at 4.4% at the end of September.
The Bank of Korea pointed out, “If the burden of high loan interest rates continues, improvement in the income conditions of the self-employed is delayed and the commercial real estate market shows sluggish performance, the scale of insolvency may expand, especially among vulnerable borrowers.”
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