April 30, 2021 13:31
The government is tightening housing loan requirements again in an effort to rein in mushrooming household debt.
From July, housing loan rules will be tightened for apartments costing more than W600 million in areas labeled as speculative zones, obliging borrowers to repay up to 40 percent of their loans from their annual income (US$1=W1,109)
But the average apartment price in Seoul has already reached W1.1 billion, making it doubtful whether apartments costing less than that can be classified as "expensive." As a result, the tougher lending rules apply to a whopping 84 percent of apartments in Seoul and 33 percent in surrounding Gyeonggi Province.
At present, the 40-percent rule applies only to apartments in speculative zones that cost more than W900 million and loans surpassing W100 million.
Signs are already on the horizon that the new rules could spark a last-ditch buying frenzy and drive up prices even more. From July next year, the 40-percent rule will apply to anyone whose loans surpass W200 million, and the year after that the cutoff will be W100 million.
According to the Financial Services Commission, a staggering 77 percent of all households in Korea would be subject to the toughened rules by then. Also, banks will be required to check individual income data to gauge the 40-percent loan limit. That means a person earning W80 million a year will only be allowed to borrow W32 million.
Finance Minister Hong Nam-ki on Thursday said the aim is to rein in galloping household debt and reduce the growth rate from the present five-to-six percent to four percent next year.
As of the end of last year, Korea's total household debt stood at W1.73 quadrillion and its household debt ratio compared to GDP reached 103 percent.
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