BOK Decides to Invest 120 Billion KRW for Safe Conversion Loans to Help 'Yeongkkeuljok'

Bank of Korea Approves Additional Supplementary Budget at Monetary Policy Committee on 28th
Bank of Korea "Promoting Household Debt Structure Improvement... Financial Stability"
Criticism Over Use of Issuing Authority to Support 'Yeongkkeuljok'

Bank of Korea Governor Lee Chang-yong is answering questions from the press at the Monetary Policy Direction press conference held at the Bank of Korea in Jung-gu, Seoul on the 13th. Photo by Kang Jin-hyung aymsdream@

The Bank of Korea will mobilize its issuance power to invest 120 billion won in the Korea Housing Finance Corporation to support the Safe Conversion Loan aimed at reducing the interest burden on "Yeongkkeuljok" (those who invest by borrowing to the limit).

On the 28th, the Bank of Korea announced that the Monetary Policy Committee approved an additional supplementary budget for this investment. Considering the practical preparation period, the actual investment is expected to take place next month.

The Bank of Korea explained, "This investment is expected to contribute to financial stability by supporting a more rapid improvement in the household debt structure during the period of rising interest rates."

The Bank of Korea expects that if the planned scale of Safe Conversion Loans scheduled until next year is smoothly supplied, the proportion of variable-rate mortgage loans will decrease.

The Bank of Korea stated, "However, we plan to closely consult with related agencies to ensure that this investment does not lead to an expansion of banks' mortgage lending capacity," and added, "we will also strive to minimize the impact on the bond market caused by the increase in the issuance of Korea Housing Finance Corporation mortgage-backed securities (MBS) used as refinancing funds due to the implementation of the Safe Conversion Loan."

Earlier, on the 24th, Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho held an emergency macroeconomic and financial meeting at the Seoul Banking Hall and said, "To stably supply the Safe Conversion Loan, which converts variable-rate mortgages to fixed-rate, the Bank of Korea plans to invest 120 billion won this year."

The Safe Conversion Loan is a policy financial product supplied by the Korea Housing Finance Corporation that allows borrowers with variable-rate mortgage loans from commercial banks to switch to fixed rates.

With the Bank of Korea's investment, if a total of 45 trillion won worth of Safe Conversion Loans are supplied by next year, the Ministry of Economy and Finance expects the proportion of variable-rate household loans, which was 77.7% as of May this year, to decrease to 72.7%.

However, there are criticisms that it is inappropriate for the Bank of Korea to mobilize its issuance power to help borrowers who recklessly took out loans aiming for capital gains during the rapid housing price surge.

Unlike government finances, the Bank of Korea's issuance power can be exercised solely by the Monetary Policy Committee's resolution, so it needs to be carried out carefully under a national consensus. The market has already raised criticisms that the Bank of Korea's investment is effectively "supporting Yeongkkeuljok."

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