Didimdol and Beotimmok Loan Interest Rates Increase by 0.2% to 0.4%p

A rental and lease listing at a real estate agency office in Seoul city.
[Photo by Yonhap News]

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The government is raising interest rates on policy loan products to curb the rising trend in housing prices. Interest rates on Didimdol loans, which are policy loans for home purchase funds, and Buteemok loans, which are for jeonse deposit funds, will be increased by 0.2 to 0.4 percentage points. Following the '8·8 Supply Plan,' attention is focused on whether these policies aimed at reducing demand can curb the recent rise in housing prices seen in Seoul and other areas.

The Ministry of Land, Infrastructure and Transport announced on the 11th that starting from the 16th, the interest rates on Didimdol loans will be raised from the current 2.15%?3.55% to 2.35%?3.95%, and Buteemok loan rates will increase from 1.5%?2.9% to 1.7%?3.3%. The rate hike varies depending on income brackets. Existing loans under review will apply the current rates.

Didimdol loans offer preferential interest rates of 0.2 to 0.5 percentage points for single-parent families, first-time homebuyers, or multicultural families. These benefits cannot be combined. Seven cases, including subscription savings enrollment and early principal repayment, allow overlapping preferential rates ranging from 0.1 to 0.7 percentage points. However, after applying preferential rates, the interest rate must be at least 1.5%.

Preferential rates for Buteemok loans are provided in six cases, such as subscription savings enrollment (0.3 to 0.5 percentage points) and early principal repayment (0.2 percentage points). The minimum interest rate must be 1.2%.

The interest rate for the 'Newborn Special Loan,' introduced to support housing for newlyweds and families with children, will remain unchanged. This reflects the loan’s limited purpose as a measure targeting households with newborns within two years to address low birth rates. In the first half of this year, the Housing and Urban Fund’s loan supply totaled 28.8 trillion won, with the Newborn Special Loan accounting for only about 4 trillion won, or 14%. Additionally, interest rates for loans to victims of jeonse fraud and irregular housing remain unchanged.

Apartment buildings in downtown Seoul.
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The Ministry of Land, Infrastructure and Transport is raising policy loan interest rates due to the rise in apartment prices in Seoul. According to the Korea Real Estate Board’s 'Weekly Apartment Trend,' Seoul apartment prices have been rising for 20 consecutive weeks since the fourth week of March. The rate of increase peaked at 0.30% in the fourth week of last month, then slightly eased to 0.28% in the fifth week and 0.26% last week, but remains higher than the weekly increase rate at the peak in 2021.

Meanwhile, the ministry will raise the maximum interest rate on subscription savings from the current 2.8% to 3.1%. This decision responds to criticism that the subscription savings interest rate is lower than market rates, reducing its effectiveness. Considering the time required for revising subscription savings regulations and developing the entrusted bank, the change is expected to be implemented as early as September.

The monthly recognized payment amount for subscription savings will also increase from 100,000 won to 250,000 won. To facilitate this, the 'Housing Supply Rules' will be amended.

The ministry plans to expand the income deduction and tax exemption conditions for subscription savings to include not only the head of a household without a home but also their spouse. This allows both the head of household and spouse to enroll in subscription savings and apply for housing. To strengthen tax benefits, the 'Restriction of Special Taxation Act' will be amended and implemented starting January 1 next year.

The recognized subscription savings payment period for minor children eligible for future housing applications has been extended from 2 years to 5 years. When a couple holds subscription savings accounts, both spouses can apply for special supply, and if both win, the first application will be considered valid. The Housing Supply Rules have been amended accordingly. Additionally, in the private housing point system, up to 50% (maximum 3 points) of the spouse’s subscription savings period can be combined with the applicant’s own subscription period, and in the event of a tie, the applicant with the longer subscription period will be selected as the winner.

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