3-year treasury yield nears 4% threshold

Fewer delinquent borrowers, but remaining debt quality worsens

Loan defaults among borrowers 60 and older rise 20%

Loans held by self-employed borrowers that have gone unpaid for at least three months have grown nearly 8 percent this year alone, as rising interest rates compound a prolonged slump in domestic demand. Pictured is a view of Tongin Market. [Jung Ho-won]
Loans held by self-employed borrowers that have gone unpaid for at least three months have grown nearly 8 percent this year alone, as rising interest rates compound a prolonged slump in domestic demand. Pictured is a view of Tongin Market. [Jung Ho-won]

The volume of loans held by self-employed borrowers who have fallen behind on repayments has jumped nearly 8 percent this year, as sharply rising interest rates collide with a persistent slump in domestic demand. Borrowers aged 60 and older are in the most precarious position: they are the only age group to see both the number of defaulters and the size of their debt grow — and their debt is expanding faster than any other cohort. Experts say many older Koreans have been pushed into subsistence-level self-employment after retirement, leaving them highly exposed to economic downturns, and that comprehensive policy measures combining business-transition support and social safety nets are urgently needed.

According to a report on sole-proprietor loan defaults submitted Monday by credit rating agency NICE Information Service to the National Assembly's Political Affairs Committee — at the request of Democratic Party of Korea lawmaker Lee In-young — the outstanding loans of 3,329,143 sole proprietors, including self-employed individuals and individuals holding business loans, stood at 1,138.97 trillion won (about $749 billion) as of end-April. That was up 0.5 percent, or 5.83 trillion won, from the end of last year.

Of that total, 160,920 borrowers had been in default — meaning they had not repaid their loans for at least three months — as of end-April, down 5.1 percent, or 8,655 people, from the end of last year. But the debt those defaulters carry jumped 7.7 percent, or 2.72 trillion won, to 37.8 trillion won — the highest level since end-November last year, when it stood at 38.05 trillion won. The figures suggest that while the number of delinquent borrowers has edged down, the quality of the remaining debt has deteriorated further.

Analysts attribute the trend to a combination of steep interest rate increases and chronic weakness in domestic consumption. The yield on the 3-year treasury bond, which stood at an annualized 2.953 percent at the end of last year, surged this year and reached 3.940 percent on June 8, approaching the 4 percent threshold.

Consumer spending is also contracting. According to the Ministry of Statistics' April industrial activity report, the retail sales index — a measure of goods consumption — fell 3.6 percent from the previous month, the steepest monthly drop since February 2024, when it declined 3.7 percent. The service industry production index, which tracks service-sector consumption, also fell 1.0 percent, its largest monthly decline since February 2022, when it dropped 1.7 percent.

Choi Jung-ki, head of the financial structured finance rating division at NICE Credit Rating, said the situation has been unusual. "Even during the period when the benchmark interest rate was being cut and then held steady, delinquency rates were rising — which was highly irregular," he said. "Semiconductors have held up, but domestic demand is weak, and we are seeing a K-shaped polarization. If interest rates now begin rising again on top of that, borrowers' situations could deteriorate significantly."

By far the most vulnerable group is borrowers aged 60 and older. Their outstanding loan balance stood at 406.75 trillion won as of end-April, up 2.5 percent, or 9.87 trillion won, from the end of last year. That stands in stark contrast to every other age group, all of which saw their loan balances shrink over the same period: borrowers in their 20s and younger fell by 349.7 billion won, those in their 30s by 1.26 trillion won, those in their 40s by 2.16 trillion won, and those in their 50s by 272.8 billion won.

As loans grew, the number of older defaulters and the size of their debt rose in tandem. The number of sole-proprietor defaulters aged 60 and older increased 0.7 percent, from 38,739 at the end of last year to 38,999 as of end-April — the only age group to post an increase. The loan amount held by those defaulters jumped 19.5 percent over the same period, from 9.93 trillion won to 11.86 trillion won, the highest growth rate of any age group.

Experts say older Koreans often turn to self-employment out of necessity after retirement, making them especially vulnerable when the economy weakens. A particularly common pattern involves purchasing low-rise residential buildings and running small-scale real estate rental businesses, only to find themselves trapped when the property market turns. The Bank of Korea flagged the issue in its December financial stability report, noting that "older self-employed individuals have a high concentration in real estate, making them highly vulnerable to property market fluctuations," and calling for "tailored, life-cycle-based support policies, including business transition assistance."

Lawmaker Lee said the rapid rise in loan defaults among older self-employed borrowers exposed a weak link in the Korean economy. "We need preemptive and comprehensive policy responses to prevent older borrowers from sinking into a debt trap," he said. "That means going beyond simple financial support to combine business restart assistance with a robust social safety net."

“고맙다 머스크?” 스페이스X 상장, 비트코인에 약일까 독일까 [크립토360]

“고맙다 머스크?” 스페이스X 상장, 비트코인에 약일까 독일까 [크립토360]

비트코인 가격이 미국과 이란의 긴장 완화 기대 속에 6만3000달러선에서 보합권 흐름을 이어가고 있다. 일론 머스크의 우주기업 스페이스X가 미 증시에 입성하며 위험자산
https://biz.heraldcorp.com/article/10770996

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