"Rescue Plan for Yeongkkeul-leo"... Equity Controversy Surrounding Anshim Conversion Loan

Launch of 45 Trillion Won Safe Conversion Loan in September
"Unfair to Support Interest with Taxes on Debt Investment"
Fixed-Rate Borrowers Say "Equity Issue"
Strict Conditions Exclude Most Seoul Residents

A notice about loan interest rates posted on the exterior wall of a commercial bank in downtown Seoul on the 17th. Photo by Kim Hyun-min kimhyun81@

[Asia Economy Reporter Song Seung-seop] Controversy has arisen over the fairness and effectiveness of the Safe Conversion Loan announced by the Yoon Seok-yeol administration. Among borrowers who have not purchased homes, there are even complaints calling it a "rescue plan for poor young investors who borrowed to the limit (Yeongkkeulreo)." Concerns are also growing that the beneficiaries will be limited to a small number as the application conditions have been drastically reduced.

According to the Financial Services Commission on the 18th, a Safe Conversion Loan worth 45 trillion won will be launched this September. The Safe Conversion Loan is a policy financial product that converts variable-rate mortgage loans into long-term, fixed-rate loans with lower interest rates. For the preferential type, the eligibility is a combined couple’s income of 70 million won or less, with a maximum loan limit of up to 250 million won.

After the announcement of the measures, various real estate investment communities have expressed dissatisfaction, saying that tenants living in jeonse or monthly rent housing do not benefit, and that the policy favors real estate owners who enjoy the benefits of rising house prices. It has been pointed out that this violates the principle of ‘personal investment responsibility.’ Housing purchase is a decision made by individuals based on their residential preferences, investment situations, and housing price outlook, so there is strong criticism about whether it is appropriate for the government to provide support just because interest burdens have increased.

A, a resident of Dogok-dong, Seoul, said, "No one told anyone to borrow to the limit to buy a house," and added, "These are decisions made for personal gain, so I don’t know if it’s right to give certain individuals long-term, fixed-rate benefits with tax money." B, a resident of Hwaseong-si, Gyeonggi Province, said, "Rather than benefiting from rising house prices, I have lived frugally, carefully managing debt and investments, so this is really disheartening," and called it a rescue plan for Yeongkkeulreo.

Seoul Average House Price 1.1 Billion Won... Safe Conversion Loan Conditions ‘Below 400 Million Won’

There is also an issue of fairness with fixed-rate borrowers. Since the base interest rate began to rise, financial authorities have actively encouraged fixed-rate loans. As a result, some borrowers chose fixed rates, which were more expensive than variable rates. However, fixed-rate loan borrowers are excluded from the Safe Conversion Loan support, so they cannot receive long-term, low-interest benefits. Consumers who followed the government’s recommendation are ironically excluded from support.

Some also view that for borrowers living in Seoul and the metropolitan area, using the Safe Conversion Loan is practically impossible, making it ineffective. This is because the application conditions have become stricter than when the Safe Conversion Loan was last launched in 2019. At that time, a one-home household with a combined couple’s income of 85 million won or less could apply. The housing condition was also a market price of 900 million won or less. Special conditions that relaxed income requirements to 100 million won for newlyweds and families with two or more children have also disappeared.

According to the Korea Real Estate Board, as of April this year, the average apartment sale price in Seoul was 1.15041 billion won. This far exceeds the general Safe Conversion Loan condition (market price 900 million won) for non-preferential types. When applying for the Safe Conversion Loan in 2019, the average apartment sale price in Seoul was in the 800 million won range, so most could apply.

In response, voices from the ruling People Power Party are calling to raise the housing condition from 400 million won to 600 million won, but the government maintains its opposition. This is due to budget constraints and the principle of prioritizing support for vulnerable groups. If the application conditions are opened too widely, the number of applicants and those rejected could surge, potentially leading to even more dissatisfaction.

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