Financial Services Commission "Considering Introduction of Ultra-Long-Term Mortgages Over 40 Years"

Preparation of 'Household Debt Advancement Plan' in Q1 Next Year

Dokyu-sang, Vice Chairman of the Financial Services Commission

[Asia Economy Reporter Kim Hyo-jin] Financial authorities are pushing to introduce ultra-long-term mortgages of over 40 years to support financially vulnerable groups.

Do Gyu-sang, Vice Chairman of the Financial Services Commission, revealed this plan during a video-hosted Financial Risk Response Team meeting on the 9th.

Vice Chairman Do stated, "We will strive to stably supply low-interest fixed-rate policy mortgages such as the Bogeumjari Loan to warmly support financially vulnerable groups." This involves the Korea Housing Finance Corporation investing 50 billion won to provide additional policy mortgages to 20,000 households of non-homeowners and low-income real demanders.

He added, "In particular, we will actively consider phased introduction measures, including pilot supply of ultra-long-term mortgages of over 40 years, from the perspective of stabilizing housing for low-income households while monitoring market conditions." Extending the maturity of mortgage loans reduces the burden of monthly repayments.

The Financial Services Commission also plans to prepare and announce an 'Advanced Household Debt Management Plan' as early as the first quarter of next year.

Regarding this, Vice Chairman Do explained, "We plan to focus on reviewing a roadmap for transitioning to borrower-level Debt Service Ratio (DSR) regulations and advanced methods for calculating DSR that reflect actual repayment capacity."

The advanced plan is expected to include detailed measures such as considering lifetime income cycles and rationalizing the maturity periods to which regulations apply. On the 30th of last month, the Financial Services Commission jointly formed a task force with the Financial Supervisory Service to promote this plan.

Vice Chairman Do also mentioned concerns that potential non-performing loans are accumulating due to regulatory relaxations, loan maturity extensions, and interest repayment deferrals implemented in response to the COVID-19 pandemic.

He continued, "In preparation for this, it is more crucial than ever for the financial sector to strengthen its loss absorption capacity based on stress test results and maintain its funding supply function," urging, "Please make efforts to accumulate sufficient loan loss provisions and, if necessary, proactively and adequately expand capital."

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