'Erratic' Didimdol Loan, Grace Period Granted... "No Reduction in Non-Capital Areas"

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The Ministry of Land, Infrastructure and Transport has decided to introduce customized measures for Didimdol loans according to the housing market situation by region and housing type. They do not plan to reduce the Didimdol loan limits for non-metropolitan areas. This decision comes after a recent attempt to hastily reduce the loan limits, which sparked strong backlash from borrowers.

On the 23rd, the Ministry stated, "We will finalize and announce tailored improvement plans for Didimdol loans, including the exclusion of non-metropolitan areas, as soon as possible." They also added, "Even if the Didimdol loan supplement measures are implemented, an appropriate grace period will be provided to minimize inconvenience to borrowers." Currently, the loan limits will not be reduced for applications already submitted.

A Ministry official said, "It is a necessary minimum measure to refrain from excessive lending practices that deviate from the purpose of introducing the Loan-to-Value ratio (LTV) to support more genuine borrowers with limited Housing and Urban Fund resources (so-called exemption from 'Bang Gongje'), or loans that could jeopardize the soundness of the Housing and Urban Fund."

Didimdol loans are a representative policy financial product for low-income households, allowing non-homeowners with an annual income of 60 million KRW or less to borrow up to 250 million KRW at a low interest rate of 2-3% per annum when purchasing a house priced at 500 million KRW or less. Newlyweds with an annual income of 85 million KRW or less can borrow up to 400 million KRW when buying a house priced at 600 million KRW or less.

Didimdol loans for home purchases and Beotimgok loans for jeonse deposits have been increasing household debt, necessitating a slowdown. However, the government's hasty policy to reduce loan sizes provoked strong opposition.

On the 11th, the Ministry and the Housing and Urban Guarantee Corporation (HUG) requested commercial banks to restrict Didimdol loan handling. KB Kookmin Bank reduced its loan limits starting from the 14th. Other banks planned to implement the changes from the 21st.

Until now, when executing Didimdol loans, the so-called 'Bang Gongje'?the priority repayment amount guaranteed to tenants under the Housing Lease Protection Act (55 million KRW in Seoul)?should have been deducted from the loan amount, but it was included in the loan amount through guarantee product subscriptions. The government requested to exclude this amount to reduce the loan size and to lower the LTV, which was recognized up to 80% for first-time homebuyers, to 70%. They also asked to completely stop 'post-registered collateral loans' for newly built apartments that have not yet been registered.

Borrowers who were planning home purchases based on the pre-change loanable amount strongly opposed the possibility of their loan size being reduced by tens of millions of KRW. Especially, prospective buyers who had purchased newly built apartments and were about to move in faced confusion as they might not be able to receive loans at all. Following criticism during the National Assembly Land, Infrastructure and Transport Committee’s audit, the government ultimately postponed the reduction of Didimdol loan limits.

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