Gov’t to free up mortgages by raising DTI ratioThe government decided yesterday to ease the debt-to-income (DTI) regulation to make it easier for future home owners to take out mortgages, as part of moves aimed at stimulating the domestic market amid a real estate slump and tight lines of credit.
“The basic structure of the restrictions on the DTI ratio will remain in place,” said Kim Dae-ki, senior presidential secretary for economic affairs, during a press briefing yesterday. “But we will partially amend some illogical parts depending on the conditions of prospective home owners.”
Kim said it was “illogical” for people with personal assets or wealth, but no regular income, to be restricted from taking out mortgages.
“We don’t need to tie the hands of retirees who have enough wealth [to justify such loans],” Kim said. “Better yet, beneficiaries [of the eased rule] should not be limited to retirees, but anyone with sufficient assets.”
He said related ministries will convene today to discuss the matter at a meeting administered by Shin Je-yoon, vice minister of strategy and finance.
The press briefing on the expected changes to the DTI regulation was announced after the government held a 10-hour meeting on ways to stimulate the economy on Saturday, which was presided over by President Lee Myung-bak.
The government has set a policy direction aimed at stimulating the domestic market, including the frozen real estate market, in the face of dismal economic markers both at home and abroad.
The DTI regulation was first introduced in 2005 under the former Roh Moo-hyun administration in hope of cooling down the overheated market. The real estate market quickly froze and further crashed in tandem with the global credit crunch in late 2008, and has never recovered.
The Lee administration tried to breathe life back into the market on numerous occasions by easing various real estate measures. However, it refrained from interfering with the DTI regulations as these are usually seen as a last resort, and an important buffer against excessive borrowing.
The current DTI ratio for buying real estate in Seoul is 50 percent or 60 percent for the Seoul metropolitan area.
The market welcomed the Blue House’s decision yesterday as it has been waiting for the regulation to be lifted.
The government also said it will pursue measures to lift the price cap on sales of new properties and remove additional taxes imposed on multiple home owners who decide to sell.
Others measures under discussion include a potential easing of restrictions on building hotels, and lifting taxes on SMEs.
Local companies that choose to relocate their manufacturing bases from overseas back to Korea will also get some of their taxes waived when they move back. The tax cuts are expected to be applied from next month.
The government is also set to encourage public and private sector workers to take summer vacations to boost consumption, partly by limiting how much money companies and public organizations can pay workers who effectively trade in their holidays.
Another measure that may face the ax is the tax added to public golf facilities such as driving ranges and courses for individual users.
By Lee Sun-min [email@example.com]
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