Even if mortgage loans are allowed for multiple homeowners... "Demand remains limited"

[Asia Economy Reporter Song Hwajeong] The government is pushing to allow mortgage loans for multi-homeowners and rental business operators. However, due to continued interest rate hikes and a sluggish real estate market, demand is expected to be limited.

According to the financial sector on the 16th, the government is promoting the allowance of mortgage loans for multi-homeowners and rental business operators. Kim Juhyun, Chairman of the Financial Services Commission, stated at the 1st National Task Inspection Meeting the previous day, "Currently, mortgage loans are not allowed for multi-homeowners or rental business operators, but considering the market situation, we plan to coordinate policy directions with the Ministry of Land, Infrastructure and Transport and the Ministry of Economy and Finance to enable them to use mortgage loans."

If mortgage loans are allowed for multi-homeowners, it will be the first easing of regulations in about four years. Previously, to curb rising house prices and speculative forces, the government banned new mortgage loans for multi-homeowners with houses in regulated real estate areas under the September 13, 2018 measures, and in the June 17, 2020 measures, mortgage loan use was prohibited for all housing sales and rental business operators in all regions.

However, even if regulations are eased, demand for loans from multi-homeowners and rental business operators is not expected to be high. This is because interest rates continue to rise and the real estate market downturn is deepening. A representative from a commercial bank said, "With loan interest rates continuously rising and the real estate market slump persisting, it is difficult for rental business operators to generate profits by taking out loans now," adding, "In this situation, they are unlikely to take out loans recklessly, so even if regulations are eased, loan demand will be limited."

According to the COFIX (Cost of Funds Index) based on new transactions in November, announced by the Korea Federation of Banks the previous day, the rate rose 0.36 percentage points from the previous month to 4.34%. It has increased for 10 consecutive months, surpassing 4% for the first time since its announcement in 2010. From the 16th, reflecting the COFIX rate hike, the upper limit of variable mortgage loan interest rates at commercial banks will rise to the high 7% range. Woori Bank’s rates will increase from 6.56?7.39% per annum to 6.92?7.72%, and KB Kookmin Bank’s rates will rise from 5.91?7.31% to 6.27?7.67% per annum.

The housing market downturn is intensifying. According to the Korea Real Estate Board’s "November Nationwide Housing Price Trend Survey," nationwide housing prices fell 1.37% compared to the previous month, with the decline widening. Jeonse (long-term deposit rental) prices also dropped 1.55%, increasing the month-on-month decline. Monthly rent prices fell 0.11%, turning to a decline compared to the previous month.

[Image source=Yonhap News]

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