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🇰🇷 South Korea /Economy & Trade

South Korea eyes easing loan curbs for first-time buyers, low-income earners

From Hankyoreh · () Korean

Translated from Korean, summarized and contextualized by DistantNews.

At a glance

News Named sources New plan
  • South Korea's financial authorities are considering excluding loans for first-time homebuyers, young couples, and low-income individuals from household debt management targets.
  • This potential measure aims to support housing demand among vulnerable groups, following discussions at a recent real estate policy forum.
  • The government may also adjust the overall household loan growth target of 1.5% for the year, as major banks have already nearly exhausted their lending capacity for the first half.

South Korean financial authorities are exploring a targeted approach to loan regulations, considering the exclusion of certain housing-related loans from overall household debt management. The move would specifically exempt loans for first-time homebuyers, young couples, and low-income individuals, aiming to ease financial burdens and support housing accessibility for these groups.

This consideration follows recent discussions at a real estate policy forum chaired by President Lee Jae-myung, where a consensus emerged on the need to relax loan regulations for younger and lower-income demographics. A senior financial official indicated a flexible approach is being considered for "pinpoint support" for these essential borrowers.

The primary method under consideration involves removing these specific loan categories from the household debt total that is subject to management. Currently, the government has set a 1.5% growth target for total household loans this year, with some exceptions already made for policy-driven loans and mid-rate private loans. The inclusion of these housing-focused loans could further expand these exceptions.

Alternatively, authorities might adjust the overall 1.5% growth target itself. Major commercial banks have reportedly used up most of their lending capacity for the first half of the year. Increasing exceptions could weaken the effectiveness of the existing regulations, prompting discussions about a broader revision of the target. This comes as the government aims to maintain a tight grip on lending, a policy intensified since the "June 27 Real Estate Measures" last year.

Further tightening of loan regulations is expected for other segments, such as restrictions on jeonse (lump-sum deposit) loans for non-resident homeowners. Proposals include reducing the guarantee ratio from public institutions or completely prohibiting such guarantees. A key challenge remains in distinguishing between speculative borrowing and genuine demand driven by factors like job relocation, education, or family care.

We need to be flexible in applying loan regulations for pinpoint support for young and low-income essential borrowers.

— Senior Financial Authority OfficialIndicating the government's consideration of easing loan rules for specific groups.
DistantNews Editorial

Originally published by Hankyoreh in Korean. Translated, summarized, and contextualized by our editorial team with added local perspective. Read our editorial standards.

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