"Hurdles Are High" · "Will Wait and See"... Lukewarm Response to Anshim Conversion Loan

Early Stage of Anshim Conversion Loan Launch Shows Low Application Amount and Number of Cases

On the 15th, when the preferential safe conversion loan that changes variable-rate mortgage loans to long-term, fixed rates starting at an annual 3.7% was launched, counselors at the Safe Conversion Loan Call Center in Mapo-gu, Seoul, were answering inquiry calls. Photo by Moon Honam munonam@

[Asia Economy Reporter Yoo Je-hoon] Lee Kwang-young (35, pseudonym), who lives in a small city in Jeonnam, had to leave a commercial bank branch without an answer when he inquired about eligibility for the Anshim Conversion Loan. Although he barely met the income criteria, his newly built apartment slightly exceeded the price limit. Lee said, "Even in provincial areas, many newly built apartments exceed the price criteria."

Kim Kyu-sung (36, pseudonym), an office worker who purchased a house in the metropolitan area two years ago with a mixed fixed interest rate, also considered the Anshim Conversion Loan but decided to wait and see. He still has about three years left on his fixed interest period, and the interest rate for the Anshim Conversion Loan (3.9~4.0% per annum) is about 1 percentage point higher than his current loan rate. Kim said, "They say the low-interest era is over, but who knows what will happen in three years," adding, "I will watch the policies after next year."

The Anshim Conversion Loan, which converts variable and quasi-fixed rate mortgage loans held by low-income and actual homeowners into long-term, fixed-rate, and installment repayment products with low interest rates, has shown lukewarm demand since its launch. Although the application dates were staggered by housing price and birth year to disperse demand, the main reasons cited are that the housing price limit (under 400 million KRW) and income limit (combined household income under 70 million KRW) are too restrictive, and the interest rate level is not attractive.

According to the financial sector on the 19th, the Anshim Conversion Loan applications, conducted online and offline by the Korea Housing Finance Corporation and six major commercial banks (KB Kookmin, Shinhan, Hana, Woori, NH Nonghyup, IBK Industrial Bank) since the 15th, have been sluggish compared to the first and second rounds. On the first day, the Korea Housing Finance Corporation received applications totaling 238.6 billion KRW and 2,406 cases, which is less than 30% of the second round.

The low application volume is partly due to the authorities dividing application dates by housing price and birth year to prevent congestion. For example, on the 15th, only borrowers with housing priced under 300 million KRW and birth years ending in 4 or 9 could apply. This measure was to prevent a recurrence of the "open run" that occurred at bank branches and on the Korea Housing Finance Corporation website during the first and second rounds.

The main reason for the lukewarm demand for the Anshim Conversion Loan is the high "hurdle." There are not many houses that meet the conditions of housing prices under 400 million KRW (300 million KRW for the preferential type) and combined household income under 70 million KRW. According to KB Real Estate, as of last month, the average housing sale price in Seoul was about 920 million KRW, and in the metropolitan area about 650 million KRW. Outside the metropolitan area, the average price in Sejong City (about 460 million KRW) exceeded the price criteria for this Anshim Conversion Loan. Additionally, the income criterion of a combined household income of 70 million KRW is also considered a high hurdle. In the second round, the price and income criteria were 900 million KRW and 85 million KRW, respectively, which were relatively more lenient than this round.

Unlike the second round, when the refinancing interest rate was around 2% per annum, the current refinancing rate is between 3.7% and 4.0%, which is another limiting factor. For example, borrowers who took out variable loans around 2020 still have the same additional interest rate, but only the increase in COFIX (Cost of Funds Index) is reflected, so their rates remain in the low to mid-3% range. Borrowers with mixed fixed-rate loans still have a fixed-rate period remaining, so even considering possible future rate increases, there is little incentive to bear an additional interest rate of around 1 percentage point.

A representative from a commercial bank said, "Except for some multi-family and row houses, there are not many houses in the metropolitan area that meet the price criteria, and dual-income households often find it difficult to meet the income criteria," adding, "Overall, there are many filters, so it seems that the 'open run' like in the first and second rounds is not occurring."

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