Did People in Their 50s and 60s Also Turn to Debt-Financed Investing? Insurance Policy Loans and Card Loans Rise, Delinquency Rates Increase

[Financial News] Insurance policy loans and card loans increased during the stock market boom in the first half of this year, particularly among people in their 50s and those aged 60 and older. As borrowing among people in their 50s and 60s increased while related loans declined among those in their 20s through 40s, concerns are also growing over the spread of so-called “debt-financed investing,” or investing with borrowed money.
According to data obtained from the Financial Supervisory Service by Lee Jong-wook, a People Power Party lawmaker on the National Assembly Planning and Finance Committee, the outstanding balance of insurance policy loans at eight major life and non-life insurers stood at 47.9119 trillion won as of the end of July, up 1.7933 trillion won, or 3.9%, from the end of last year.
Insurance policy loans are loans secured by an insurance policy’s surrender value. The outstanding balance of such loans at life insurers rose 5.6% to 33.2042 trillion won, driving the overall increase.
By age group, the increases were particularly pronounced among people in their 50s and those aged 60 and older. The balance for people in their 50s rose 4.5% to 19.6701 trillion won, while that for people aged 60 and older increased 10.2% to 13.1546 trillion won. By contrast, balances declined among people in their 20s, 30s and 40s, falling 4.6%, 4.7% and 1.3%, respectively.
Financial authorities are closely monitoring the possibility that this year’s stock market boom and the timing of public offering subscriptions may have contributed to the increase in borrowing. A financial-authority official said, “Insurance policy loans are typically repaid heavily at the beginning of the year, but they increased from the start of this year.” The official added, “Loans increased alongside the stock market boom and the timing of public offering subscriptions, raising the possibility of debt-financed investing.”
Card loans also increased, led by people in their 50s and 60s. The outstanding balance of card loans at eight specialized credit card companies stood at 39.5207 trillion won as of the end of July, up 418.3 billion won, or 1.1%, from the end of last year.
The card loan balance for people in their 50s rose 2.1% to 13.7827 trillion won, while the balance for those aged 60 and older increased 6.9% to 10.8990 trillion won. In contrast, card loan balances among people in their 20s through 40s declined by between 3% and 4%.
The burden of delinquency is also growing along with the size of the loans. Card loan delinquency rates rose across all age groups. The increase was largest among people in their 30s, whose rate climbed from 2.42% at the end of last year to 2.96% at the end of July, a rise of 0.54 percentage points. The rate for people in their 40s rose from 2.14% to 2.60%, while that for people in their 20s increased from 2.33% to 2.74%.
Concerns are also emerging over the increase in borrowing among older people. For those in their 50s and 60s, whose regular income typically declines after retirement, delayed loan repayments could lead to consequences such as the cancellation of insurance policies.
Financial authorities have also moved to strengthen oversight of the increase in insurance policy loans. In April, they asked insurers to reduce loan limits, and some insurers are reportedly to have actually lowered their limits.
Lee Jong-wook said, “The reality is that ordinary people’s debt is continuing to grow.” He added, “The government must closely monitor the state of the household economy and take preemptive action to manage debt-financed investing and household loans.”
[email protected] Hong Ye-ji Reporter