A study has shown that if the average interest rate on household loans reaches seven percent, some one-point-nine million indebted people in the country will not be able to pay off the principal and interest, even if they spend the absolute minimum on living expenses.

The Financial Supervisory Service on Monday unveiled the results of an analysis that examined the impact of high interest rates on the ability of borrowers to make repayments.

As of late March, the average interest rate applied to the financial sector's total household loan balance of over one-point-six quadrillion won stood at three-point-96 percent.

A further three percentage point rise in the rate will result in one-point-nine million people with a debt service ratio of over 70 percent. This means these borrowers have loans maturing within the year that account for more than 70 percent of their annual income.

This latest figure is up from the previous one-point-four million estimate, while the combined debt of this group has also gone up by 123 trillion won to surpass 480-point-four trillion.

A debt service ratio higher than 70 percent indicates an inability to pay off the loan with the income that remains after subtracting the minimum cost of living.