Household Loans Must Be Reduced... Special Interest Rates Raised and 50-Year Mortgage Loan Limits Lowered

Increase in Special Bogeumjari from the 7th
Loan limits set assuming 40-year maturity for 50-year mortgage loans

The financial authorities have decided to raise the interest rates on the Special Bogeumjari Loan operated by the Korea Housing Finance Corporation and reduce the loan limit for 50-year mortgage loans in order to curb the increase in household loans.

Starting from the 7th, the interest rates for the Special Bogeumjari Loan will increase. The general type will rise by 0.25 percentage points, and the preferential type will increase by 0.2 percentage points. Reflecting the increase, the general type will have a base interest rate of 4.65% per annum (10 years) to 4.95% (50 years), and the preferential type (for housing prices up to 600 million KRW and income up to 100 million KRW) will have a base interest rate of 4.25% (10 years) to 4.55% (50 years). Socially disadvantaged groups, including low-income youth, newlywed households, persons with disabilities, and single-parent families, can receive an additional preferential interest rate (up to 0.8 percentage points), allowing them to borrow at rates as low as 3.45% (10 years) to 3.75% (50 years) per annum.

A representative from the Korea Housing Finance Corporation explained, "Despite this increase, the Special Bogeumjari Loan interest rates remain slightly lower than the mortgage loan rates of commercial banks." He added, "As of the 24th of last month, the average mixed mortgage loan rates offered by the four major commercial banks ranged from 4.28% to 5.40%." He further explained, "Due to the rise in funding costs caused by increases in government bond and mortgage-backed securities (MBS) rates, as well as higher-than-planned effective application amounts, it was unavoidable to adjust the interest rates."

Jamwon Hangang Apartment seen from Gangbuk. Photo by Younghan Heo younghan@

However, victims of jeonse fraud who apply for the Special Bogeumjari Loan can receive the same interest rates as before (3.65% to 3.95%) to support housing stability and economic recovery.

The 50-year mortgage loan, identified as a major cause of the rapid increase in household loans, will have its Debt Service Ratio (DSR) calculation criteria changed. Although the actual term is 50 years, the DSR calculation will assume repayment over 40 years to determine the loan limit. As a result, the loan limit will be reduced. This measure aims to prevent the 50-year mortgage loan product from becoming a loophole to evade DSR regulations.

The financial authorities have decided not to impose age restrictions related to the 50-year mortgage loan to avoid controversy over reverse discrimination. Instead, they urged banks to make voluntary efforts to manage household loans so that lending does not significantly increase in the multi-homeowner and group loan sectors.

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