"Restrictions on Buying Houses Eased, but Loan Interest Rates Are Soaring Like This"

Mortgage loans available for apartments over 1.5 billion won
But mortgage rates exceed 7%
Interest burden keeps demand cold despite eased regulations

The Bank of Korea raised the base interest rate by 0.5 percentage points, and the real estate transaction market is expected to experience a prolonged winter. On the 13th, a red light was on at a traffic signal near an apartment in downtown Seoul.

"Who in their right mind would take out a loan to buy a house at this time? Even if they loosen the LTV to 100%, no one would dare to go to the bank because of the interest rates."

Although financial authorities have eased real estate financing regulations, public reaction remains cold. The Financial Services Commission announced the following on the 10th. Starting December 1, non-homeowners and one-homeowners (conditional on disposing of their existing home) in regulated areas can borrow up to 50% of the house price. It is also possible to get a mortgage loan when purchasing apartments priced over 1.5 billion KRW in speculative or speculative overheated districts. For low-income or genuine buyers within regulated areas, banks can lend up to 70% of the house price with a maximum limit of 600 million KRW.

The government first plans to ease the Loan-to-Value ratio (LTV), which had been differentiated by region and housing price within regulated areas. Until now, non-homeowners and one-homeowners (conditional on disposing of their existing home) had LTVs ranging from 20% to 50% depending on the housing price within regulated areas. The financial authorities plan to uniformly ease this to an LTV of 50%. However, multi-homeowners will maintain the current LTV conditions.

The mortgage loan limit for low-income and genuine buyers will be expanded from 400 million KRW to 600 million KRW. The LTV is allowed up to 70%. The conditions are ▲ combined annual income of the couple below 90 million KRW ▲ housing price in speculative or speculative overheated areas below 900 million KRW (800 million KRW or less in adjusted target areas) ▲ and meeting all requirements such as being a non-homeowner household head.

Interest rates soaring to the sky and DSR regulations... Public opinion remains cold

As of the 11th, the variable mortgage loan interest rates of the five major banks (KB Kookmin, Shinhan, Hana, Woori, NH Nonghyup) ranged from 5.09% to 6.82%, and fixed rates ranged from 5.09% to 6.72%. This explains the lukewarm response despite the easing of regulations. The market mortgage loan interest rates have exceeded 7% annually, increasing the interest burden, and the real estate market forecast predicts a continued decline in housing prices, resulting in no transactions.

For example, to buy a 1.5 billion KRW apartment with an LTV cap of 50%, taking out a 750 million KRW loan (30-year term, equal principal and interest repayment, annual interest rate of 5%) requires a monthly principal and interest payment of 4.02 million KRW. If the loan interest rate rises to 6%, the monthly payment becomes 4.49 million KRW, and if it rises to 7%, it becomes 4.99 million KRW. The financial sector widely expects the base interest rate to continue rising in the first half of next year, which is why people do not consider buying houses even if regulations are eased.

There is also the Debt Service Ratio (DSR) regulation, which limits the amount of loan relative to income. No matter how much the financial authorities loosen the LTV, if one's income remains the same, the amount one can borrow from the bank remains unchanged. Since July this year, if the total loan amount exceeds 100 million KRW, the bank sector applies a DSR limit of 40%.

An official from a commercial bank advised, "Since loan interest rates have risen significantly, even if regulations are eased, borrowers are not thinking about taking out loans now, and even if they need to borrow, they must carefully check whether the required loan amount can be approved due to the DSR."

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