Lawmakers have been reviewing easing loan regulations to make it easier for young people and newlyweds to buy homes, including measures that could raise their loan-to-value ratios up to 90 percent, sources close to the matter said Sunday.
Several options under discussion among ruling Democratic Party lawmakers include limiting the LTV in areas designated as “overheated speculative zones” -- such as Seoul’s affluent Gangnam district -- to 40 percent, while raising the LTV for people aged under 35 and low-income newlyweds to 70 percent in non-regulated zones. All districts in Seoul and key metropolitan areas across the country have been designated as “overheated” so far.
To help non-homeowners purchase property, financial authorities have been reviewing the option of launching state-backed 40-year mortgages by the end of the year. The launch of the 40-year option will mark the longest-term deal ever offered here, surpassing the existing 30-year state-backed mortgages offered by the Korea Housing Finance Corporation, a state-run housing financial institution better known here as LH.
Should the long-term mortgages be given the greenlight, the LTV for the young age bracket could be raised to 90 percent, market watchers said.
The 40-year mortgage’s lending terms will fundamentally follow those of LH’s 30-year option, which is available to households with an annual income of less than 70 million won ($62,000) and homes priced below 600 million won.
On top of easing loan regulations, the ruling Democratic Party has been mulling a relaxation of comprehensive real estate tax rules, by raising the tax threshold to property valued at 1.2 billion won from the current 900 million won.
The lawmakers plan to hold a meeting with Seoul city officials on Monday to discuss the related housing policies.
Despite talks of easing loan rules, industry watchers worry the stricter rules on the debt service ratio, or DSR, underway would offset any advantages for the younger generation priced out of affordable apartments.
The so-called DSR measures how much a borrower has to pay in principal and interest payments in proportion to his or her yearly income.
Currently, the 40 percent DSR rule is applied to borrowers who buy a home worth more than 900 million won or who take out credit loans worth more than 100 million won. But from July, the rule will include borrowers who buy a home worth more than 600 million won in select regions.
During President Moon Jae-in’s administration, the average price of an apartment unit measuring 82.4 square meters has jumped around 80 percent from 660 million won in 2017 to 1.19 billion won in 2020, according to data from civic group Citizens’ Coalition for Economic Justice. The organization analyzed 63,000 apartments in 22 apartment complexes in Seoul.
By Jung Min-kyung (email@example.com)