Government to Expand Safe Conversion Loans to 25 Trillion Won This Year

Jeori Jeonse Loan Guarantee Limit is 400 Million Won

[Asia Economy Reporter Song Hwajeong] The government will expand the Safe Conversion Loan by an additional 5 trillion won this year to supply a total of 25 trillion won in order to stabilize the financial sector for the public. Additionally, to reduce the interest burden on jeonse loans, the low-interest jeonse loan guarantee limit will be increased from the existing 200 million won to 400 million won.

According to the Financial Services Commission on the 14th, the second Emergency Economic and Livelihood Meeting chaired by President Yoon Seok-yeol discussed measures to stabilize the financial sector for the public.

The Financial Services Commission decided to strengthen financial support efforts such as refinancing (low interest rates, fixed interest rates, extension of repayment periods), debt adjustment (principal and interest reduction), and new funding support (living expenses, emergency funds) to alleviate the burden on vulnerable sectors such as small business owners, households, youth, and low-income groups due to rising interest rates.

To reduce housing-related financial burdens, the government plans to ease the loan interest burden for homebuyers and alleviate housing cost burdens for actual demanders such as jeonse tenants through sufficient financial support. To this end, the Safe Conversion Loan, which converts variable-rate mortgage loans to fixed-rate loans, will be expanded by an additional 5 trillion won this year to supply a total of 25 trillion won. Originally, the plan was to supply 20 trillion won each in this year and next year, totaling 40 trillion won, but it was decided to expand by 5 trillion won this year without additional budget input. In addition, a 10bp (1bp = 0.01 percentage point) additional interest rate reduction benefit will be given to low-income youth.

Furthermore, the maximum loan maturity will be extended from 30 years to 40 years for private financial companies and from 40 years to 50 years for policy financial institutions such as the Korea Housing Finance Corporation to reduce the repayment burden. To reduce the interest burden on jeonse loans, the low-interest jeonse loan guarantee limit will be increased from the existing 200 million won to 400 million won. The income deduction for principal and interest repayment of jeonse and monthly rent loans will also be expanded from 3 million won to 4 million won annually.

To enable rapid recovery and restart for youth, the Credit Recovery Committee (CRC) will establish a special rapid debt adjustment program that temporarily supports interest reduction and repayment deferral for one year.

The repayment burden for self-employed and small business owners will also be eased. Through a new start fund of 30 trillion won, non-performing loans will be purchased and debt adjustments such as principal reduction will be made, and through refinancing loans worth 8.5 trillion won, high-interest loans over 7% will be converted into low-interest loans. Additionally, funds amounting to 42 trillion won will be supported for remodeling and business stabilization.

Even after the maturity extension and repayment deferral measures expire at the end of September, the government will promote responsible management by main financial institutions to ensure smooth maturity extension and repayment deferral without abrupt loan recalls. The financial authorities are discussing a plan to autonomously grant maturity extension and repayment deferral to 90-95% of borrowers who apply during the ongoing measures. Furthermore, a policy financial program will be promoted to provide preferential benefits such as interest rates and limits to small business owners who have received consulting on online sales support and marketing.

The Financial Services Commission plans to implement support measures for each vulnerable sector such as small business owners, housing, debt adjustment, and low-income finance as quickly as possible. A Financial Services Commission official said, "Except for unavoidable cases such as legal amendments, we plan to complete the implementation without delay in the third quarter according to public demand and policy conditions," adding, "We will continue to devise additional measures to resolve difficulties for vulnerable groups such as youth and low-income people."

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