Starting Next Month, Significant Interest Rate Cuts on 'Didimdol·Beotimmok' Loans

[Image source=Yonhap News]

[Asia Economy Reporter Moon Jiwon] The interest rates for 'Didimdol,' a housing purchase loan, and 'Beotimmok,' a jeonse deposit loan, will be significantly lowered for the first time in four years.

The Ministry of Land, Infrastructure and Transport announced on the 19th that, following the Bank of Korea's base interest rate cut, the interest rates for Didimdol and Beotimmok will be reduced by 0.25 percentage points and 0.2 percentage points respectively, starting from the 18th of next month.

Previously, on the 16th of last month, the Bank of Korea lowered the base interest rate from 1.25% to 0.75%, a 0.5 percentage point cut. The Ministry of Land decided to reduce the interest rates of Didimdol and Beotimmok loans for the first time in four years since 2016 to ease the housing burden of low-income households struggling due to COVID-19 and other factors.

For general Didimdol loans, only those who are heads of households without home ownership and have an annual income of 60 million KRW (70 million KRW for households with two or more children) or less can apply. With the interest rate cut starting next month, the rates will range from 1.95% to 2.70% per annum.

Considering that Didimdol borrowers receive an average preferential interest rate of 0.4 percentage points, the effective interest rate drops to 1.55% to 2.30%, which is cheaper than the Korea Housing Finance Corporation's Bogeumjari Loan (2.10% to 2.35%) or commercial banks' housing purchase loans (average 2.52%).

Didimdol users are expected to reduce their annual interest burden by approximately 320,000 KRW on average.

General Beotimmok loans are available to heads of households without home ownership with a combined annual income of 50 million KRW (60 million KRW for households with two or more children) or less. The interest rates range from 2.10% to 2.70%. This rate cut will reduce the average annual interest burden by about 110,000 KRW.

The interest rate for the Youth Beotimmok Jeonse loan will be lowered starting from the 8th of next month. The eligible age range is expanded from under 25 years old to under 34 years old. The interest rate for single household heads under 25 will decrease from 1.8%?2.7% to 1.2%?1.8%. The new youth loan limit will also increase from 35 million KRW to 50 million KRW.

This interest rate cut applies not only to new applicants for Didimdol and Beotimmok loans but also to existing borrowers with variable interest rates.

Hwang Yuneon, Director of the Housing Fund Division at the Ministry of Land, said, "We expect this measure to somewhat ease the housing cost burden for low-income households without homes," adding, "We will continue to do our best to provide tailored financial support."

This content was produced with the assistance of AI translation services.