Individuals in their 30s and 40s, a key demographic in the economy, are increasingly burdened by debt. While new borrowing has become difficult due to loan regulations, the average debt per borrower in this age group has actually increased, driven by significant financial needs for housing and child-rearing. Concerns are growing that limited income growth compared to other age groups may restrict their ability to consume and save.
According to data from the Bank of Korea's economic statistics system, the average household debt for borrowers in their 30s reached 113 million won at the end of the second quarter of this year, an increase of 490,000 won from the previous quarter. For those in their 40s, the average debt rose by 620,000 won to 124.22 million won, the highest among all age groups.
In contrast, borrowers under 20 had an average debt of 33.65 million won, while those in their 50s had 100.36 million won, and individuals over 60 had 83.91 million won, all showing a decrease from the previous quarter. Only the 30-40 age group saw an increase in debt.
The rise in debt among 30-40 year olds is largely attributed to housing-related loans. This age group typically faces significant financial demands for purchasing homes, securing rental deposits, and funding child-rearing and education. In fact, while the total amount of new mortgage loans issued in the second quarter decreased by 9.2% compared to the previous quarter, the average outstanding mortgage debt per borrower increased by 1.2%. As new loans decline and repayment of existing loans slows, the total debt burden has continued to grow.
The debt-to-asset ratio has also increased for those in their 30s and 40s. Last year, the debt-to-asset ratio for households in their 30s was 30.3%, up 0.5 percentage points from the previous year. For those in their 40s, the ratio rose to 22.8%, an increase of 0.3 percentage points. In contrast, the ratios for those in their 50s and over 60 remained stable at 16.7% and 10.8%, respectively.
The pace of income growth has proven insufficient to alleviate the debt burden. The increase in disposable income was only 1.38 million won for those in their 30s and 1.28 million won for those in their 40s. This is significantly lower compared to the increases of 3.51 million won for those in their 50s and 2.10 million won for those over 60. Even as incomes rise for the 30-40 age group, the relatively small increase limits their ability to absorb the growing burden of principal and interest payments.
Experts suggest that managing household debt should not only focus on curbing new loans but also consider the repayment capacity of existing borrowers. Those in their 30s and 40s face substantial expenses related to housing and children, and they already carry the highest levels of debt. If their income and asset conditions do not support this burden, they are likely to reduce consumption and savings first. A decline in spending from this key economic demographic could pose challenges for domestic demand recovery.
Kim Dae-jong, a professor at Sejong University, stated, “The 30-40 age group is at a life stage where expenditures are concentrated, which naturally leads to higher average household debt. However, the problem is that the rate of debt increase is outpacing income growth. If high interest rates persist, the burden of principal and interest repayments will grow, leading to reduced consumption and savings among this age group, which could result in sluggish domestic demand.”
* This article has been translated by AI.
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