Mortgage qualifications stiffenThe country’s top financial regulatory agency tightened eligibility criteria for a government mortgage program as it struggles to handle a deluge in applications and rein in household debt.
The Ministry of Strategy and Finance and the Financial Services Commission said Thursday that they will adopt income qualifications for the so-called Bogeumjari loan program and lower the maximum price of houses eligible for the program next year. Bogeumjari loans have lower fixed interest rates than traditional mortgages and lengthier loan periods.
Currently, no income criteria exist. Under the new regulations, a couple whose annual salary is less than 70 million won ($60,373.60) would qualify for the mortgage.
The cap on housing prices would be lowered to 600 million won from 900 million won. The regulator will also drop the ceiling on loans to 300 million won from 500 million won.
The Financial Services Commission said that the moves are meant to direct more money to low-income buyers who face difficulties purchasing a home in an overheated real estate market.
“Households with less than 70 million won in annual income account for 80 percent of the entire population,” said Doh Kyu-sang, head of the FSC’s financial policy bureau.
“So, the adjusted qualification would help us narrow down the focus of our policy towards potential homebuyers with modest income levels,” Doh said in a news conference at the Central Government Complex.
His remarks were targeted at speculative real estate investors, which the government sees as the drivers of the heated property market in some parts of the country. To weed out investors, the FSC modified its rules so that borrowers who don’t own homes would be eligible for the program. Currently, borrowers who already own homes can apply for the program on the condition that they will sell their existing house in three years.
The surging demand in applications also contributed to the tightening of lending criteria. The size of Bogeumjari loans has reached 14.9 trillion won this year as of November, accounting for 28.5 percent of all mortgages.
In October, the Korea Housing Finance Corporation, a state-run body handling government mortgage programs, temporarily applied stricter eligibility criteria to the loan program. It lowered the value of apartments eligible for a loan from less than 900 million won to less than 300 million won and the maximum loan was drastically slashed from 500 million won to 100 million won.
The combined annual income of a married couple applying for a loan has to be less than 60 million won annually, a sign of the effort to contain the increasing size of loans.
The Bogeumjari loan program was adopted in the mid-2000s to provide long-term mortgages to lower-income households. The mortgages have fixed interest rates with maturity periods of 10 to 30 years.
BY PARK EUN-JEE [firstname.lastname@example.org]
with the Korea JoongAng Daily
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