[2020 National Audit] Rep. Kim Byung-wook "Conditions for Using Bogeumjari Loan Should Be Relaxed"

The Need to Change Housing Loan Requirements Due to Market Situation Changes

[Asia Economy Reporter Park Sun-mi] There has been a call to ease the eligibility requirements for the Bogeumjari Loan to reflect changes in market conditions due to rising housing prices and incomes.

On the 20th, Kim Byung-wook, a member of the National Assembly's Political Affairs Committee from the Democratic Party of Korea, expressed concern, stating, "Since both housing prices and incomes have risen compared to the market conditions when the Bogeumjari Loan eligibility requirements were changed in 2017, failure to appropriately adjust these requirements could result in unintended harm to low- and middle-income groups." He pointed out, "Given that the Bogeumjari Loan is intended to support real demand from the middle class and below, it is necessary to adjust the housing price eligibility to between 700 million and 900 million KRW and the income eligibility to between 80 million and 90 million KRW to reflect the changed market conditions."

Analysis of data from the Korea Real Estate Board and Statistics Korea shows that the average apartment sale price in Seoul increased by 58.1%, from 562.02 million KRW in January 2017 to 888.51 million KRW in September 2020, while the annual income threshold for the top 20% income bracket rose by 15.7%, from 75.72 million KRW in the first quarter of 2017 to 87.6 million KRW in the second quarter of 2020.

The Korea Housing Finance Corporation (KHFC) handles the Bogeumjari Loan, a long-term fixed-rate installment mortgage loan. Originally, the Bogeumjari Loan was a policy financial product available regardless of annual income, as long as the collateral housing price was 900 million KRW or less. However, following the government's 'Policy Mortgage Reform Plan' announced in December 2016, from January 2017, the loan eligibility was changed to only those with collateral housing priced at 600 million KRW or less and an annual income of 70 million KRW or less. The problem is that the economic situation in 2020 has significantly changed compared to 2017, and if the Bogeumjari Loan eligibility requirements are not improved, a substantial number of low- and middle-income households may be excluded from the beneficiaries.

Assemblyman Kim stated, "Although apartment prices have risen, the Bogeumjari Loan eligibility requirements applied by the Korea Housing Finance Corporation since January 2017?housing price of 600 million KRW or less and annual income of 70 million KRW or less?remain unchanged," adding, "While maintaining the government's efforts to stabilize the housing market, it is necessary to skillfully operate policies that reflect market realities. The Korea Housing Finance Corporation, as the operator of the Bogeumjari Loan, should take the lead in related discussions through close consultation with financial authorities."

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