[2022 National Audit] Jugumgong President: "Ansim Jeonhwan Daechul, Reluctant to Refinance Due to No Interest Rate Adjustment Cycle"

Ruling and Opposition Lawmakers Criticize Lack of Realism at National Audit Session

Yoo Ui-dong, a member of the People Power Party (left), is questioning Choi Jun-woo, President of the Korea Housing Finance Corporation, during the National Assembly's Financial Services Committee audit held at the Busan International Financial Center on the 17th.

[Asia Economy Reporter Minwoo Lee] The head of the Korea Housing Finance Corporation (KHFC), the agency responsible for implementing the Safe Conversion Loan program that converts variable or quasi-fixed (hybrid) mortgage loans into long-term, fixed-rate, installment repayment products at low interest rates, stated that the unexpectedly low application rate is due to many potential applicants waiting without applying, anticipating a future interest rate cut. This explanation was criticized by lawmakers from both ruling and opposition parties during the National Assembly audit as an unrealistic policy design.

At the National Assembly’s Political Affairs Committee audit on the 17th, lawmakers criticized the KHFC’s Safe Conversion Loan program for its low application rate, attributing it to unrealistic conditions. Yang Jeongsuk, a member of the Democratic Party of Korea, said, "As of the 13th, the application rate was 13.2%, which is very different from past Safe Conversion Loan implementations that closed within days of opening," and added, "The much lower-than-expected rate is due to the application requirements being too unrealistic." Yoo Eui-dong of the People Power Party also pointed out, "The housing price requirement of 400 million KRW or less applies to only about 2% of homes even in Seoul, indicating that the policy considered only the suppliers’ realistic needs and neglected the demand side."

This criticism stems from repeated responses by KHFC President Choi Jun-woo, who explained that the low application rate is because many borrowers are expecting interest rate cuts. President Choi said, "Borrowers whose interest rate adjustment period has not yet arrived are reluctant to refinance," and added, "The combined effect of some expecting interest rates to fall has resulted in a lower application rate than initially anticipated."

Therefore, the application deadline, originally set for today, will be extended until the end of this month, and the housing price criteria will be raised on November 7th.

Democratic Party lawmaker So Byeong-cheol criticized, "The Bank of Korea has announced it will continue to raise the base interest rate steadily, so it seems like nonsense to expect a rate cut," and urged, "KHFC should strongly present opinions to the Financial Services Commission and the Ministry of Economy and Finance from the perspective of the vulnerable applicants who need the Safe Conversion Loan, and prepare realistic measures."

Meanwhile, the Safe Conversion Loan program, which began accepting applications this month, was supplied with a total scale of 25 trillion KRW. However, as of the 13th, the cumulative application amount was only 3.3109 trillion KRW (13.24%). Critics point out that the housing price criterion (400 million KRW or less) and income criterion (combined household income of 70 million KRW) are too restrictive, and the interest rate level is not attractive. According to KB Housing Price Trends, as of the 5th of last month, the average apartment sale price nationwide was 556.01 million KRW.

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