"Are You Telling Me to Rent?"... Real Buyers Frustrated by Stricter Jeonse Loan Regulations

Banks Sequentially Restrict Household Loans
"Do Not Regulate Jeonse Loans for Genuine Borrowers"... 청원 Petition Emerges
Experts Say "Citizens Should Have Been Given Time to Prepare for Loan Regulations"

A row of real estate agencies in an apartment complex in Seoul. The photo is unrelated to specific expressions in the article. [Image source=Yonhap News]

[Asia Economy Reporter Heo Midam] "We are all being driven into a corner by loan regulations. What did we do wrong?"

As commercial banks tighten regulations on jeonse loans following the government's household loan management policy, backlash from genuine borrowers is growing. Due to loan restrictions, there have been consecutive cases of people giving up moving into apartments they purchased or breaking jeonse contracts. Especially in a situation where housing prices and jeonse prices are rising, leading to an inevitable increase in mortgage loans, the dissatisfaction of genuine borrowers is intensifying as loans are being regulated.

Given this situation, citizens are sighing with self-deprecating humor, calling themselves so-called "loan refugees." In particular, the non-homeowners who relied on loans to secure housing are complaining that even the opportunity to raise funds for their own home has been taken away. Experts acknowledge the necessity of loan regulations but point out that the problem lies in the radical implementation.

Recently, it has been revealed that commercial banks are suspending or restricting jeonse loans. NH Nonghyup Bank stopped accepting all new household secured loans, including jeonse loans, starting in August. KB Kookmin Bank also began reducing household loan limits, including jeonse loans, move-in balance loans, and mortgage loans, from the 29th of last month. Hana Bank plans to reduce jeonse loan limits upon lease contract renewals starting from the 15th.

The reason commercial banks are taking such measures is related to the total household loan management recommended by financial authorities. Earlier, in April, the financial authorities announced a "household debt management plan" aiming to reduce the household debt growth rate to 5-6% this year and 4% next year. As financial authorities showed their determination to manage household debt, commercial banks have been suspending loans one after another to meet the growth rate targets.

A petition urging the relaxation of regulations on jeonse loans has been posted on the Blue House National Petition Board. Photo by Blue House National Petition Board screen capture.

However, as loans are regulated, the anxiety of citizens who dreamed of owning a home or planned jeonse contracts is increasing. Recently, posts requesting the easing of jeonse loan regulations have been appearing on the Blue House's national petition board.

In a petition titled "Please do not regulate loans for genuine borrowers," posted on the 6th, the petitioner lamented, "The amount we have to borrow has increased due to already soaring housing prices, including jeonse loans, interim payment loans, and mortgage loans, but suddenly blocking loans?what are we supposed to do?"

They continued, "Those who are about to renew their jeonse, those who won long-awaited subscription lotteries and need to pay interim payments, and those who are preparing mortgage loans after making a big decision?all are being driven into a corner by a single loan regulation."

They also emphasized, "Is it our fault for simply saving diligently, bit by bit, to move into jeonse or buy a house? Loan regulations are fine, but please distinguish genuine borrowers and regulate accordingly."

Additionally, on the Blue House national petition board, there are petitions related to loan regulations such as "Please reconsider jeonse loan regulations," "I won a subscription lottery two years ago. It is unreasonable to apply current loan regulations," "I am moving into an apartment pre-sale after 11 years, but if group loans are blocked, do genuine borrowers have to suffer?" and "Please lift interim payment and balance payment loan regulations for non-homeowner genuine borrowers."

Citizens are visiting a loan counter at a bank in downtown Seoul to receive consultations. The photo is unrelated to specific expressions in the article. [Image source=Yonhap News]

Some voices complain that the government raised housing and jeonse prices with flawed policies and is now blocking loans, causing non-homeowners to suffer twice.

Kim, a worker in his 20s, said, "As housing prices rise day by day, it has become a world where you cannot secure your own home without 'parental support' or loans. You cannot buy a house just by diligently saving your salary." He lamented, "But now that loans are blocked, even the small hope of owning a home has disappeared." He added, "Measures to stabilize housing prices should be prepared, but it seems only measures that squeeze non-homeowners are emerging."

Meanwhile, it appears that it is becoming even harder for ordinary people to secure their own homes. Especially, the average price of apartments in Seoul has doubled over the 4 years and 4 months of the Moon Jae-in administration, making the dream of owning a home increasingly distant.

According to KB Kookmin Bank's monthly housing sales price time series statistics, the average apartment price per 3.3㎡ in Seoul was 46.52 million KRW last month. This is double the 23.26 million KRW recorded in May 2017 when the Moon Jae-in administration took office. The average jeonse price per 3.3㎡ in Seoul also rose from 16.41 million KRW in May 2017 to 24.77 million KRW last month, marking a 50.9% increase.

Experts point out that the problem lies in the radical implementation of loan regulations. Professor Kim Taeg-gi of Dankook University's Department of Economics said, "As household debt increases, loan regulations are inevitable," but added, "The problem is that loan regulations were implemented abruptly without any preparation from actual homeowners. Not giving economic agents time to prepare and imposing loan regulations by financial authorities is tyranny."

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