[Editorial] Household Debt Enters the 2,000 Trillion Won Era Amid "All-In" Borrowing and Margin Investing

Household debt in Korea has surged past 2,000 trillion won for the first time ever as people borrow heavily to buy homes and invest in stocks. Data from the Bank of Korea's "Preliminary Household Credit Report for Q2 2026," released on the 19th, shows that household credit reached 2,019.8 trillion won by the end of June, an increase of 25.9 trillion won from the end of the first quarter. This surge is attributed to a sharp rise in "all-in" borrowing for housing and margin investing in stocks. The debt increase in the second quarter was the largest in nearly five years. With national debt swelling due to large-scale fiscal expansion, the rapid growth of household debt has raised growing concerns.

Compounding the problem, domestic interest rates are on an upward trend. Following its decision last month to raise the base rate to 2.75%, the Bank of Korea Monetary Policy Board is preparing for further hikes. As the burden of principal and interest repayments increases, financially vulnerable groups such as small business owners, multiple debtors, and low-income households will be the first to collapse. A decline in disposable income and a contraction in consumer sentiment could pour cold water on South Korea's already unstable economic growth trajectory, which relies heavily on the semiconductor industry. Additionally, the government's recent decision to significantly relax total household loan regulations (from 1.5% to >3%) to calm public backlash over practices like "loan open runs" is another factor unfavorable to reducing household debt.

Beyond the staggering figure of 2,000 trillion won, attention must be paid to the deteriorating "quality" of rising debt. A significant portion of the second-quarter increase is closely linked to the recent housing and stock market mania. The pace of this increase was also rapid. While household debt has traditionally been dominated by housing-related loans, the Bank of Korea emphasized that other loans—indicators of margin investing such as credit loans, negative balance accounts, and stock-collateral loans—have surged more than twofold compared to the first quarter.

According to the Bank for International Settlements (BIS), South Korea's household debt-to-nominal GDP ratio stood at 88.6% by the end of last year, placing it among the highest in the OECD. This figure is higher than that of major advanced economies such as the United States, Japan, and the United Kingdom.

During the 1997 national debt crisis, households with substantial savings helped stabilize society by absorbing the shock. However, today it has become difficult to expect such a stabilizing role even when the nation faces crises. To manage household debt at dangerous levels, there is no alternative but direct and straightforward measures. We must take a long-term view and break the vicious cycle of "all-in" borrowing and margin investing. This requires stabilizing the housing market in the Seoul metropolitan area and creating a predictable foundation for capital markets. Policies that appear to encourage debt, such as debt forgiveness or interest rate benefits for low-credit borrowers, should also be avoided as they contradict market principles.