"First-Time Homebuyers LTV Up to 90%"... Lee and Yoon United in Calling for Loan Regulation Easing

Lee Jae-myung, the Democratic Party presidential candidate (left), and Yoon Seok-youl, the People Power Party presidential candidate, are preparing for the debate at the first invited candidates' debate for the 20th presidential election, hosted by the National Election Commission, held on the afternoon of the 21st of last month at the MBC Media Center Public Hall in Mapo-gu, Seoul. (Photo by Yonhap News)

[Asia Economy Reporter Ryu Tae-min] Both Lee Jae-myung, the candidate of the Democratic Party of Korea, and Yoon Seok-yeol, the candidate of the People Power Party, have raised the easing of loan regulations as a campaign promise, raising expectations that various regulations such as real estate mortgage loans will be relaxed. In particular, attention is focused on whether not only the easing of the loan-to-value ratio (LTV) but also the debt service ratio (DSR) regulation and the total household loan volume regulation will be partially eased.

First, candidate Lee Jae-myung plans to recognize an LTV of up to 90% for first-time homebuyers, considering factors such as region, area, and price. Currently, when purchasing a house, the LTV is applied between 20% and 70% depending on whether the area is a speculative zone, the sale price, and the number of houses owned. In speculative zones or speculative overheating districts, an LTV of 40% is applied if the sale price is 900 million KRW or less, and it is reduced to 20% if it exceeds 900 million KRW. If the buyer is a first-time homebuyer, the LTV is eased by 10 percentage points if the combined annual income of the couple is 100 million KRW or less and the house price is 900 million KRW (800 million KRW in regulated areas) or less. If a house priced at 500 million KRW or less is purchased in a regulated area, an LTV of 70% is applied.

Candidate Yoon Seok-yeol has also announced that he will raise the LTV cap to 80% for first-time homebuyers. In addition, he plans to unify the LTV to 70% regardless of the region, even if it is not a first-time purchase. However, it is expected that the LTV will be applied differentially at 30% to 40% for multi-homeowners depending on the number of houses owned.

However, despite the easing of LTV regulations, there are concerns that the DSR regulation remains an obstacle, often limiting the loan amount. DSR refers to the ratio of the principal and interest repayment amount of all financial loans to annual income. Currently, it applies when the total loan amount is 200 million KRW or more, and if the annual income is 50 million KRW, the principal and interest to be repaid annually should not exceed 20 million KRW. In particular, from July, the DSR regulation application standard is planned to be strengthened from a total loan amount of 200 million KRW to 100 million KRW.

Candidate Lee Jae-myung intends to ease not only the LTV but also the DSR regulation. He stated that regarding the DSR regulation, it will be applied considering future income to support housing welfare for young people. On the other hand, candidate Yoon Seok-yeol is known not to have presented a separate pledge related to the easing of the DSR regulation.

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