Loan program to get a 20 trillion won injectionThe government will pour an additional 20 trillion won ($18 billion) into local banks for its new long-term fixed-rate mortgage program after the low-interest loan plan reached its lending limit just days after it was announced.
“Just four days after we implemented the ‘safer loan’ program, it reached the lending limit of 20 trillion won,” Financial Services Commission (FSC) Chairman Yim Jong-yong said at a briefing on Sunday. “Through negotiations with relevant organizations, we are planning to provide an additional 20 trillion won starting March 30.”
Still, “the additional 20 trillion won is the maximum amount of funding, and we must clarify that there will be no more expansions [of the lending limit].”
Qualifications for the loan, with annual interest rates of between 2.55 and 2.6 percent for terms of 10, 15, 20, or 30 years, will remain the same only for those who borrowed no more than 500 million won for a 900 million won home at least one year ago.
Statistically, as many as 2 million people could qualify for the program.
Yim said that instead of selling loans in real time, the FSC will accept all qualification forms over five days, starting today and ending April 3, then convert those loans all together into fixed-rate loans.
However, if the total amount needed for those applying for the new program exceeds the additional 20 trillion won limit, financial regulators will sort through applicants who possess relatively cheaper houses and convert their loans first, the FSC said.
The FSC’s decision to prioritize low-price mortgage loans followed public backlash over the fact that the new government-backed loans were mostly afforded to middle-class homeowners with high credit ratings at local banks who have the ability to simultaneously repay the principal and the interest.
The FSC also dismissed demands to expand the program to nonbanking entities, such as savings banks, saying it would not work for the purpose of the new loan, which is to improve the state of the country’s surging household debt. “We judged it would be difficult to extend the program to those with loans at nonbanking institutions,” Yim said. “This program is not only to lower lending rates for current mortgages, but to improve the quality of floating-rate loans by converting them into fixed-rate loans. To that end, it is difficult to include loans at nonbanking institutions.”
The new mortgage program was launched as part of the government’s efforts to reduce the skyrocketing number of housing loans in the country. The most recent data by the Bank of Korea show Korea’s household loans exceeded 1,000 trillion won as of December, with more than half of them being mortgage loans.
BY KIM HEE-JIN [firstname.lastname@example.org]