The government is reducing the limit of ‘stepping stone loans’, which are policy loans for the common people. It is interpreted that additional regulations were put in place as the proportion of policy loans in total household loans increased.
According to the financial sector on the 16th, the Ministry of Land, Infrastructure and Transport and the Housing and Urban Guarantee Corporation (HUG) sent an official letter to a number of commercial banks that handle housing and urban fund loans, requesting that they limit the handling of stepping stone loans. Previously, if you signed up for guarantee insurance, the ‘room deduction’ (55 million won in Seoul Metropolitan Government standards) was included in the loan, but it was decided to limit the size of the loan by not recognizing this.
For example, if you purchase a house worth 300 million won in Seoul, you could initially borrow up to 210 million won (LTV 70%), but now the limit has been reduced to 155 million won, excluding 55 million won (Seoul City’s small rental deposit amount). It will happen.
The official letter sent by the government also includes information on reducing the benefits for first-time homebuyers by lowering the current loan-to-value ratio (LTV) of 80% to 70%.
Previously, KB Kookmin Bank restricted the handling of policy loans from the 14th of this month. Shinhan, Hana, and Woori Bank also plan to restrict the handling of policy loans from the 21st of this month.
The financial sector believes that although the growth in household loans has slowed this month, the government has taken out additional cards as the proportion of policy loans has increased. According to the financial authorities, household loans increased by 5.2 trillion won last month compared to the previous month, which fell to 56.5% of the increase in August (9.7 trillion won). However, policy loans in September increased by 2.2 trillion won compared to the previous month, increasing by 400 billion won compared to the increase in policy loans in August (1.8 trillion won).
Some say that there will be limits to the government’s ability to reduce household loans with this measure. An official from a commercial bank pointed out, “Considering that the scope of regulation is narrow as the number of houses subject to stepping stone loans is 500 million won in the first place, it is highly likely that it will only increase the resentment of borrowers rather than having the effect of dramatically reducing household loans.”
Reporter Kang Woo-seok wskang@donga.com