No time for a quick fixThe government has backed down on its full-fledged restrictions on housing loans in just two weeks. On Thursday, Financial Services Commission (FSC) Chairman Koh Seong-beom said he will “flexibly manage” loans for jeonse (long-term deposits for rent) to protect the people who really need them.
“The FSC will tolerate even if our household debt increases more than six percent,” he said. Earlier, heads of the fiscal, monetary and financial authorities vowed to keep the household debt increase rate in the six-percent range.
Abrupt loan regulations without even considering the apparent impact on real demand caused many side effects in the market. Commercial banks that already exceeded or have approached the six-percent threshold had to stop lending to those who desperately needed it. (Some banks gave their customers housing loans on a first-come, first-served basis.) As a result, a number of people who do not own a house became so-called “jeonse refugees,” who have to give up living in their subscribed new apartments or cancel or renew their jeonse contracts. Online real estate communities are full of sad stories about their eleventh-hour attempts to borrow money from loan sharks. The Blue House website also is plastered with desperate petitions to ease regulations on housing loans.
Given the unavoidable interest rate hike, unstable movements in financial markets at home and abroad, and the soaring household debt, you can hardly find fault with loan regulations by financial authorities. But the problem is the timing and method. The government suddenly resorted to loan regulations just because of its concerns about dire repercussions of the interest rate hike after sitting on its hands over the last four years.
Financial authorities claim that they checked the total amount of household debts each year. But they stopped short of regulating commercial banks, which lent money beyond their limits. On top of that, the government only helped escalate apartment prices across the country because of its endless flops in real estate policy. As a result, ordinary people can’t buy an apartment without getting loans from banks. Due to government policy failures, people without homes are victims.
After turning a blind eye to his administration’s botched real estate policy, President Moon Jae-in ordered financial authorities to do their best for banks to provide their customers with loans for jeonse and paying the balance. The government must come up with a real solution, not a quick fix. Period.