Ultra-Strong Housing Mortgage Loan Regulations to Be Implemented Starting Tomorrow

Starting tomorrow, the limit for housing mortgage loans (mortgage loans) will be capped at 600 million won for purchasing homes in the metropolitan area and regulated regions.

On the 27th, the Financial Services Commission held an "Emergency Household Debt Review Meeting" chaired by Secretary General Kwon Dae-young, announcing unprecedented measures to strengthen loan regulations.

This new measure is a government emergency response to the recent "panic buying" phenomenon in the real estate market, as apartment prices in Seoul rose by 0.43% this week, recording the highest increase in 6 years and 9 months.

Setting a limit on the total amount of mortgage loans, regardless of income or housing prices, is an unusual regulatory move. The Financial Services Commission explained, "This is a measure to restrict excessive borrowing for purchasing high-priced homes."

Complete Blocking of Loans for Multi-Homeowners and Gap Investment

In the metropolitan area and regulated regions, if individuals who own two or more homes purchase an additional home, the loan-to-value ratio (LTV) will be set to 0%, making loans effectively impossible.

The same regulation applies to first-time homebuyers who wish to purchase an additional home while retaining their existing one.

However, if the sale of the existing home is a condition, the LTV will be 50% in regulated areas and 70% in non-regulated areas, with the disposal deadline drastically shortened from the previous 2 years to 6 months.

The provision of conditional jeonse loans used for gap investing will also be prohibited, and the varying mortgage loan terms across banks will be standardized to 30 years to prevent evasion of the total debt service ratio (DSR) regulations.

The limit for mortgage loans aimed at stabilizing living conditions will be capped at a maximum of 100 million won, and the limit for credit loans will be tied to the borrower’s annual income.

Mandatory Actual Residence and Reduction of Policy Loans

For housing purchases made using mortgage loans, a mandatory move within 6 months will be imposed, allowing loans only for actual residency purposes. This regulation will equally apply to policy loans such as the housing fund’s Bogusil and Buteemok loans.

These lending restrictions will be implemented solely in the metropolitan area and regulated regions, differentiating them from regional real estate policies.

The LTV for first-time homebuyers using mortgage loans will also decrease from the current 80% to 70%. The loan limits for policy loans, including the housing fund's Dideumdol (purchase) and Buteemok (jeonse) loans, will be adjusted down to a maximum of 100 million won according to the target groups.

The guarantee ratio for jeonse loans will also be lowered from the current 90% to 80%.

Significant Reduction of Overall Household Loan Targets

Along with this measure, financial authorities will drastically reduce the total household loan targets for the second half of the year across the financial sector to about 50% of the original plans.

Although the supply of policy loans will also be reduced, it has been adjusted to decrease by 25% compared to the annual supply plan, considering the need to support residential stability for the low-income and vulnerable populations.

This regulation will be immediately applied starting on the 28th to prevent the concentration of loan demand.

The financial authorities will monitor compliance with the regulations through on-site inspections across the financial sector and hold weekly household debt review meetings.

Kwon Dae-young, Secretary General of the Financial Services Commission, emphasized, "We will immediately implement additional prepared measures, such as further strengthening LTV in regulated areas, expanding DSR application to jeonse loans and policy loans, and increasing risk weights for mortgage loans as necessary."

Relevant departments are also actively considering the designation of additional regulated areas if necessary.

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