[2030 Debt Warning] "Easier Loans" for Youth Drowning in Debt... Populism-Tainted Politics

Housing Loan Policy Eased for Youth Starting This Month
As Presidential Election Approaches, Both Parties Flood with Related Policies
Experts Warn "Populism to Win Public Favor"

[Asia Economy Reporter Kim Hyo-jin] Despite the increasing debt burden on young people due to the frenzy of 'Debt Investment (Bitt-u)', 'Soul Pulling (Yeongkkeul)', and other trends, the political circles and government seem to be focusing on lowering the loan barriers for these groups. There are growing voices warning that such policies, criticized as populism aimed at the presidential election, could boomerang on the youth in the future.

A representative example is the housing loan relaxation policy implemented on the 1st of this month. The core is to significantly expand the Loan-to-Value ratio (LTV) for young people and low-income real demand buyers who meet certain conditions. Previously, the 10 percentage point LTV preferential benefit applied to speculative and speculative overheating districts and regulated areas has been increased up to 20 percentage points for groups such as young people. Therefore, in many cases, up to 70% LTV can be recognized.

The eligibility criteria for preferential benefits have also been lowered. The income standard, which was 80 million KRW combined for couples, has been adjusted to 90 million KRW or less, and for first-time homebuyers, from 90 million KRW or less to under 100 million KRW. The housing price criteria have been relaxed from 600 million KRW or less to 900 million KRW or less in speculative overheating districts, and from 500 million KRW or less to 800 million KRW or less in regulated areas. The per-person limit for youth-tailored jeonse (long-term deposit lease) guarantees has increased from a maximum of 70 million KRW to up to 100 million KRW, and the guarantee fee has been lowered from 0.05% annually to 0.02%. The supply scale limit (totaling 4.1 trillion KRW) has been abolished.

An official from a commercial bank said, "It is still difficult to estimate the effect of the policy," but expressed concern that "especially for young people, since the biggest purpose of loans is housing, it is only a matter of time before the total volume of loans for the youth expands." The official criticized, "It is questionable whether it is right to have rapidly driven up housing prices with reckless housing policies, reducing opportunities for homeownership, and then belatedly say, 'We will let you borrow more debt, so buy a house.'"

The Presidential Race Intensifies... Populism Targeting Youth Also Rises

Populist policies emphasizing the financial difficulties of young people are gaining momentum as the ruling and opposition parties' presidential race intensifies. An example is the 'Basic Loan' advocated by Lee Jae-myung, a leading presidential candidate from the Democratic Party of Korea and Governor of Gyeonggi Province. The basic loan proposes lending 10 million KRW to all citizens at an annual interest rate of 2.8%. Kim Byung-wook, a lawmaker from the same party, is concretizing the basic loan concept by introducing the 'Basic Loan Act,' which targets those aged 19 to 34 and allows borrowing up to 10 million KRW once at an annual interest rate of 3%. Song Young-gil, the Democratic Party leader, has pledged to work with the government to expand financial support for young people by significantly increasing the limit on monthly rent loans and lowering guarantee fees.

The opposition People Power Party is also actively stimulating youth votes by easing financial regulations. Kim Ki-hyun, the party's floor leader, criticized the Moon Jae-in administration's loan regulation policies in last month's parliamentary negotiation group representative speech and announced plans to raise the LTV and Debt-to-Income ratio (DTI) by up to 20 percentage points for young people and newlyweds and to reduce acquisition tax. Won Hee-ryong, a presidential candidate from the People Power Party and Governor of Jeju Province, has expressed the possibility of recognizing up to 100% LTV for young people without homes trying to purchase their first house. Kim Eun-hye, a lawmaker from the same party, revealed on her social media that LTV should be loosened to over 90% for young people with repayment ability buying their first home and urged the government to pursue policies in this direction.

Regarding these political moves, Cho Sung-mok, head of the Institute for Financial Inclusion, defined them as "populism aimed at gaining immediate public favor" and pointed out that "these politicians are not looking at the future five or ten years ahead." Especially concerning the basic loan advocated mainly by Governor Lee, he criticized, "Lending money to young people without any screening is like putting poisoned meat into their mouths."

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