Yoon pledges debt relief for low-income people after rate hike
President Yoon Suk-yeol speaks at a weekly economy meeting on Thursday. (Yonhap)
The meetings deal with pressing economic issues affecting what they call a “vulnerable group” of self-employed people, small business owners and recent college graduates. Policy makers discussed inflation last week. This week they unveiled measures to help the group overcome higher borrowing costs.
“If the band falls, the whole economy collapses…we can’t let them bear the brunt of skyrocketing prices and skyrocketing interest rates,” Yoon said. The benchmark rate rose 50 basis points to 2.25% despite concerns over worsening household debt.
In the first quarter of this year, debt stood at just over 104% of Korea’s gross domestic product, making Asia the fourth most indebted economy among 36 major economies surveyed by the Institute of International Finance. .
“The government will push for debt relief,” Yoon said at the meeting.
Later in the afternoon, the Financial Services Commission said it would expand a scheme to help the vulnerable group switch to loan deals with better terms and extend their repayment periods.
Under the current program which has already been renewed four times, maturing loans taken out by the vulnerable group are due to expire in September this year. Financial institutions participating in the program will decide for themselves whether to extend loans again, the senior policymaker said.
“As far as I know, institutions have already deployed services to help the group,” FSC Chairman Kim Joo-hyun said.
Young Koreans fresh out of college or between the ages of 19 and 39 will be able to take out more loans to cover the higher cost of “jeonse”, where tenants pay a lump sum cash deposit to rent a house and pick it up once the standard two-year contract expires.
They will also get help from the government to pay off their debts through equity investments. Chairman Kim said the commission would conduct a thorough screening process so as not to publicly endorse unwise investments.
“Unless we need to ask the National Assembly to change the laws to make all of our plans work, we expect to see them take off by the third or fourth quarter,” Kim said.
By Choi Si-young ([email protected])