[Household Debt Measures] From May, 70% LTV Applied to Land and Other Non-Residential Mortgage Loans Across All Financial Sectors

Implementation Across All Financial Sectors on the 17th of Next Month

[Asia Economy Reporter Park Sun-mi] Starting next month, the loan-to-value ratio (LTV) limit regulations for non-mortgage housing loans such as land and officetels will be expanded to all financial sectors.

According to the household debt management plan announced on the 29th, from May 17, the LTV limit regulations for non-mortgage loans on land, officetels, commercial buildings, etc. will be uniformly applied to all financial sectors, extending beyond the current mutual finance sector. This is a follow-up measure to the Korea Land and Housing Corporation (LH) land speculation allegations. The applied limit is a maximum LTV of 70%. Currently, the LTV 70% regulation for non-residential collateral loans is only applied in the mutual finance sector, but this will be expanded to all financial sectors.

From July, for new non-mortgage loans in land transaction permission areas, the LTV will be strengthened to 40%, but exceptions will be allowed for actual demanders such as farmers and fishermen through verification of the Agricultural Register and Agricultural Management Entity Certificate.

From July 2023, to ensure the full introduction of borrower-level DSR, the handling practices for non-mortgage loans will also be improved. The goal is to apply borrower-level DSR even when handling non-mortgage loans.

The handling practices of household loans, including non-mortgage loans in the mutual finance sector, will also be improved. There has been a need to suppress the possibility of non-mortgage loans in the mutual finance sector being misused for real estate speculation funding and to block this. Currently, financial authorities are inspecting whether there are vulnerable parts in the handling practices of household loans such as non-mortgage loans in the mutual finance sector and are working on preparing supplementary measures. Last month, the financial authorities conducted on-site inspections at places including Buksiheung Nonghyup and a survey on the overall status of non-mortgage loans to check the appropriateness of handling non-mortgage loans.

Lee Se-hoon, Director of Financial Policy Bureau at the Financial Services Commission, stated, "We will regularly check the soundness status centered on the Mutual Finance Policy Council, examine risk factors related to non-mortgage loans among household loans in the mutual finance sector, and if necessary, prepare additional supplementary measures and promote improvements in loan handling practices in the mutual finance sector."

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