Hong Nam-ki: "Individual DSR Fully Implemented from July 2023... LTV Regulations Also Apply to Land" (Comprehensive)

Non-residential Mortgage Loans Also Subject to LTV and DSR Regulations
"Household Debt Growth Rate in 2022 Managed to Pre-COVID Levels"

Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, is delivering opening remarks at the 'Emergency Economic Central Countermeasures Headquarters Meeting' held on the 29th at the Korea Eximbank in Yeouido, Seoul. Photo by Kang Jin-hyung aymsdream@

[Asia Economy Reporter Jang Sehee] The government is accelerating efforts to strengthen regulations to manage the rapidly increasing household debt. While applying the Debt Service Ratio (DSR) on a borrower basis, it will also introduce Loan-to-Value (LTV) and DSR regulations for non-housing secured loans such as land and officetels.

Hong Nam-ki, Acting Prime Minister and Deputy Prime Minister for Economy, announced on the 29th at the 34th Emergency Economic Central Countermeasures Headquarters Meeting and the 2nd Innovation Growth Strategy Meeting held at the Korea Eximbank in Seoul, "To prevent excessive borrowing, we plan to gradually expand the application of DSR regulations on a borrower basis and fully implement it from July 2023." The four major directions presented by the government are: improving the macroprudential management system, establishing lending practices based on repayment ability, supplementing systems for vulnerable sectors, and expanding financial support for low-income and young people.

Deputy Prime Minister Hong stated, "As a follow-up measure to the real estate speculation eradication and recurrence prevention plan announced at the end of March, we will fully introduce LTV and DSR regulations for non-housing secured loans such as land and officetels."

However, to support low-income and young people who may face difficulties due to strengthened loan regulations, the government plans to introduce ultra-long-term mortgages of 40 years to reduce the burden of principal and interest repayments. The purpose is to lower the monthly repayment burden through these ultra-long-term mortgages.

Household loan growth rate rose to 7.9% in 2020... "Household debt growth rate in 2022 to be managed at pre-COVID levels"

The government also announced a long-term plan to manage the household debt growth rate. Deputy Prime Minister Hong said, "We will pursue a gradual soft landing by managing the household debt growth rate at 5-6% in 2021 and at 4%, the pre-COVID level, in 2022," adding, "The household debt issue is directly linked to the livelihoods of low-income households such as jeonse (key money deposit) and housing funds, and at the same time, it could trigger financial system risks, so careful inspection and management are necessary."

The government analyzed that household loans inevitably increased again during the COVID-19 crisis. The household loan growth rate rose by 3.8 percentage points from 4.1% in 2019 to 7.9% last year.

Regarding the plan to promote regulatory innovation in the robotics industry, Deputy Prime Minister Hong said, "We will identify a total of 33 regulatory reform tasks as a proactive regulatory response." Four tasks, including establishing business owner operation standards for collaborative robots and allowing delivery robots to use elevators, are expected to be completed more than a year ahead of the original target deadline (2022). Furthermore, completed regulatory improvement tasks will be promptly supported through budget projects for demonstration and focused support for business model commercialization.

Deputy Prime Minister Hong also announced plans to improve the public procurement system for small and medium-sized enterprises (SMEs). He explained, "The main points include excluding monopolized items from the designation of competitive products among SMEs and conducting priority purchases worth about 12 trillion won for startup company products as part of expanding public procurement."

Deputy Prime Minister Hong said, "The government supports SMEs that have difficulty securing early sales channels by utilizing the public procurement market," adding, "Last year, about 80% of the total public sector purchase amount was accounted for by SME products, showing significant quantitative growth."

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