Angry Genuine Buyers... Will the Government Unveil the Bogeumjari Loan Reform Card?

Possibility of Raising Standards for Housing Prices and Income Discussed
Concerns Raised Over 'Adjusting House Prices to Fit'

The area around Eunma Apartment in Daechi-dong, Gangnam-gu, Seoul. Photo by Hyunmin Kim kimhyun81@

[Asia Economy Reporter Kim Jin-ho] Attention is focused on whether the 'relaxation of loan regulations for actual buyers' plan, scheduled to be announced by the government this month, will include the Bogeumjari Loan. The ruling party's determination to help actual buyers achieve their 'dream of owning a home' is firm, and it is reported that the Korea Housing Finance Corporation and financial authorities have also reached a consensus that recent changes in the real estate market should be partially reflected.

According to the financial sector on the 15th, it is expected that the threshold for the policy mortgage product Bogeumjari Loan, aimed at stabilizing housing for low-income households, will be lowered. A financial sector official said, "I understand that the financial authorities have started reviewing the issue under pressure to actively relax loan regulations for actual buyers," adding, "Whether it will actually be implemented is uncertain, but considering the recent situation, the possibility cannot be ruled out."

The Bogeumjari Loan allows loans up to 300 million KRW with a loan-to-value ratio (LTV) of 70% when purchasing a house priced at 600 million KRW or less, provided the income condition of 70 million KRW or less per year (85 million KRW for newlyweds) is met. The financial authorities plan to apply the Bogeumjari Loan requirements to ultra-long-term mortgage products with a 40-year maturity starting in July.

The possibility of relaxing the Bogeumjari Loan has been a steadily raised issue in recent years. This is due to criticism that it is difficult to find houses eligible for the Bogeumjari Loan (600 million KRW) mainly in Seoul and the metropolitan area, where real estate prices have surged. According to KB Kookmin Bank, the average apartment sale price in Seoul last month reached 1.11123 billion KRW. It is known that apartments priced at 600 million KRW or less account for less than 20% of the total in Seoul.

The government and ruling party are reportedly considering raising the price limit for houses eligible for the Bogeumjari Loan from the current 600 million KRW to 900 million KRW. The Korea Housing Finance Corporation also reported a similar improvement plan to the National Assembly earlier this year.

There is also a possibility of relaxing the income requirements. The current 70 million KRW (85 million KRW for newlyweds) is likely to be significantly raised to over 100 million KRW. Roh Woong-rae, a Supreme Council member of the Democratic Party of Korea, argued in February regarding the relaxation of the Bogeumjari Loan that "the combined income of a couple should be expanded to 150 million KRW and the house price limit to 900 million KRW."

However, there are concerns that relaxing the Bogeumjari Loan could have a negative impact on the market. While the real estate market is said to have recently entered a stable phase, relaxing the Bogeumjari Loan could be distorted as 'inflating house prices.' In fact, some government ministries, including the Ministry of Land, Infrastructure and Transport, are known to hold negative views on relaxing loan regulations. In real estate communities, there are also growing concerns that if the house price standard for the Bogeumjari Loan is raised to 900 million KRW, the prices of houses currently in the 600 million to 800 million KRW range will rapidly rise to 900 million KRW.

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