Long-term Homeless Individuals Considered for Mortgage Loan Relaxation by Ruling Party This Year

Public Sentiment Rapidly Shifts Ahead of By-Elections
'Regulation-Focused' Real Estate Policy Shift
2017 August 2 Measures Ease LTV and DTI
Mortgage Loan Redesign Under Review
Lower Barriers Expected for Mortgage Products Like Bogeumjari and Didimdol Loans

On the 3rd, despite the government's measures, the Seoul real estate market continues its upward trend following last year. In a commercial area densely populated with real estate agencies in Songpa-gu, Seoul, prices for property sales and monthly rents are posted. Photo by Kang Jin-hyung aymsdream@

[Asia Economy Reporter Koo Chae-eun] The ruling party has begun considering easing the criteria for policy mortgage loan products exclusively for actual demand and long-term non-homeowners, following the increase in Loan-to-Value ratio (LTV) and Debt-to-Income ratio (DTI) limits.

The intention is to lower the loan thresholds that hinder the formation of the so-called ‘actual demand housing ladder’ by reducing limits, interest rates, and qualifications for products like the Bogeumjari Loan or Didimdol Loan, or by designing new mortgage loans. This appears to be a shift in policy direction from the previously ‘regulation-only’ stance as real estate public sentiment deteriorates ahead of the April 7 by-elections.

On the 30th, Hong Ik-pyo, the Policy Committee Chair of the Democratic Party of Korea, explained in a phone interview with Asia Economy, "We are reviewing plans to redesign or ease conditions and criteria for (policy) mortgage loans related to financial products exclusively for long-term non-homeowners." Chair Hong added, "We will start by easing existing regulations (such as the strengthened LTV and DTI from the August 2, 2017 measures) and then review the rest based on market conditions," emphasizing, "We believe it is necessary to relax the screening conditions for mortgage products for actual demanders who have been long-term non-homeowners for a certain period."

In fact, the currently operating policy mortgage products (Didimdol Loan, Bogeumjari Loan, Qualified Loan) have been criticized for being out of touch with the realities of the real estate market, such as the increased median apartment prices in the metropolitan area. For example, the Didimdol Loan operated by the Korea Housing Finance Corporation requires a combined annual income of 60 million KRW or less for couples and a housing price of 500 million KRW or less. However, according to KB Real Estate, the median apartment sale price in Seoul this month reached 973.33 million KRW, approaching 1 billion KRW, and the metropolitan area is at 693.66 million KRW, on the verge of surpassing 700 million KRW.

Kim Tae-nyeon, Standing Election Committee Chairman of the Democratic Party of Korea, is attending the Central Election Committee meeting held at the National Assembly on the 24th and delivering an opening remark. Photo by Yoon Dong-joo doso7@

Calls for easing mortgage product criteria, including the Bogeumjari Loan, have been continuously raised in political circles. Roh Woong-rae, a Supreme Council member of the Democratic Party of Korea, said on the 15th of last month regarding the Bogeumjari Loan standards applicable to the ‘40-year mortgage,’ "It is necessary to expand the scope to include a combined couple income of 150 million KRW and housing priced up to 900 million KRW." Kim Byung-wook, a member of the same party, also mentioned during last year’s National Assembly audit, “Since both housing prices and incomes have risen compared to the market conditions when the Bogeumjari Loan requirements were changed in 2017, if these requirements are not appropriately adjusted, innocent victims may arise among the lower and middle classes.”

However, the ruling party still considers blanket acquisition tax reductions or loan interest rate cuts for non-homeowners and actual demanders as ‘premature.’ Chair Hong stated, "We need to consider the household debt exceeding 1,700 trillion KRW and the large market liquidity, so it is a matter to be judged later based on market conditions." Regarding the timing of easing LTV and DTI, he said, "We will observe market conditions in April and May, derive detailed plans, and decide on the implementation timing by June." This means comprehensively considering the trends in household debt fluctuations and the impact of strengthened capital gains tax and comprehensive real estate tax on multiple homeowners starting in June.

On the previous day, the ruling party announced its plan to ease LTV and DTI conditions exclusively for non-homeowner actual demanders. In this regard, Park Young-sun, the Democratic Party candidate for Seoul mayor, said on the 29th after a focused campaign rally, "The easing of LTV and DTI was my proposal," adding, "Housing issues and job issues for youth are on the same level." Currently, in speculative overheated zones and regulated areas, the LTV for houses priced under 900 million KRW is 40%, and for the 900 million to 1.5 billion KRW range, it is 20% (DTI is 40%).

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