Calm Atmosphere... 'Switch to Annual 3% Rate' Safe Conversion Loan Application Begins

"Housing Prices and Birth Years Filtered Heavily... A Repeat of the Previous Great Chaos Unlikely"

[Image source=Yonhap News]

[Asia Economy Reporter Yu Je-hoon] The preferential-type Safe Conversion Loan, which converts variable and quasi-fixed rate mortgage loans held by low-income and actual owners into long-term, fixed-rate, installment repayment products with low interest rates, has begun accepting applications. Unlike the first and second rounds, which saw 'open runs' both online and offline, a calm atmosphere is currently observed at frontline branches and online channels.

According to the financial sector on the 15th, the Korea Housing Finance Corporation and six major commercial banks (KB Kookmin, Shinhan, Hana, Woori, NH Nonghyup, IBK Industrial Bank) started accepting applications for refinancing Safe Conversion Loans through online channels from 9 a.m. this morning. Offline applications through bank branches began at 9:30 a.m., the opening time of commercial banks.

The Safe Conversion Loan targets one-homeowners with a combined household income of 70 million KRW or less and allows conversion up to 250 million KRW within the existing loan range. Interest rates of 3.8% to 4% are applied depending on the maturity, while those with an income of 60 million KRW or less and youth aged 39 or younger receive a 0.1 percentage point (p) lower rate of 3.7% to 3.9%.

As loan interest rates have surged sharply due to rapid rate hikes, consumer interest appears considerable, similar to the previous first and second Safe Conversion Loan rounds. According to the Housing Finance Corporation, about 347,000 visitors accessed the pre-notification website since mid-last month. Each commercial bank also conducted pre-consultations through non-face-to-face channels, but it is reported that many inquiry calls were received at branches.

However, as of 10 a.m. today, no significant congestion has been observed during the application process. Even at commercial bank branches in Sogong-dong, Seoul, a major business, public institution, and shopping district, the crowds seen during the first Safe Conversion Loan in 2015 were not evident. A bank official said, "Although it has only been about 30 minutes since applications started, unlike the first round, there are not many face-to-face applications nationwide." Another bank official also stated, "There seems to be no major congestion at Seoul area branches at the moment."

Additionally, the Housing Finance Corporation’s application, which accepts applications from borrowers of banks other than the six major banks and secondary financial institutions, did not experience significant congestion unlike the second round, which had tens of thousands waiting. This is attributed to the staggered application dates based on housing prices and birth years to minimize confusion on the application day, with participation from the six major banks as well. According to financial authorities, applications for homes priced at 300 million KRW or less are accepted from today until the 30th, while those priced at 400 million KRW or less can apply from the 6th to the 17th of next month. Also, only borrowers whose birth year ends in 4 or 9 can apply today.

Each financial institution has also introduced or expanded various non-face-to-face channels to prevent congestion. The Housing Finance Corporation expanded servers and increased call center staff, while each bank deployed artificial intelligence (AI), voice, and chatbot consultation services in their applications to respond to non-face-to-face demand.

Above all, the application conditions targeting one-homeowners with housing prices of 400 million KRW or less and combined household income of 70 million KRW or less are considered restrictive. According to the Korea Real Estate Board, as of last month, the median sale price of homes in the Seoul metropolitan area reached 501.09 million KRW, showing a significant difference from the national average of 292.29 million KRW. Because of this, banks expect related inquiries to concentrate more on branches in the outskirts of the metropolitan area and local branches rather than in Seoul or major cities.

The key issue is the general strike planned by the Financial Labor Union on the 16th, but many expect it will not cause major disruption. Although the union announced that 100,000 people would gather on the strike day, some bank unions are participating mainly with leadership and show little enthusiasm. During the 2016 general strike, only 2.8% of commercial bank employees participated. Financial authorities held a review meeting with related institutions and banks this morning to prepare for the strike, discussing securing and deploying personnel to prevent work gaps.

A financial sector official said, "Since there are not many homes priced at 400 million KRW or less in the metropolitan area except for some multi-family and row houses, demand is largely concentrated in the outskirts and local areas. The authorities, learning from the congestion caused by the first and second rounds with first-come-first-served and unified counters, have created an overall filtering system by differentiating application dates by housing price and day of the week, with participation from commercial banks as well." He added, "Although a general strike is scheduled for tomorrow (the 16th), the overall participation rate is expected to be low, so there should be no major issues."

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