Kim Byung-hwan, the Chairperson of the Financial Services Commission, noted that there is growing interest in related policies as he stated that he would review the "equity mortgage." An equity mortgage is a concept where the government and individuals determine their "equity" when implementing loans for homeownership, similar to the "shared mortgage" carried out during the Park Geun-hye administration in 2013.
According to the financial sector on the 28th, the shared mortgage introduced in 2013 allowed homebuyers to borrow funds at lower interest rates compared to the market, sharing profits and losses with the lending institution based on housing price fluctuations. It was introduced to expand the purchasing power of the lower-income population.
The reason Kim is considering introducing a similar concept of an equity mortgage is also similar. Kim explained, "As home prices continue to rise, if the total debt repayment ratio (Debt Service Ratio (DSR)) regulation is gradually tightened, those who cannot hold much cash will face restrictions in purchasing homes. However, taking out loans to purchase homes may pose issues in terms of overall macroeconomic stability."
However, the shared mortgage was suspended due to low market demand and operational complexity after being implemented in 2013 under the Park Geun-hye administration. In fact, after its introduction in 2013, sales performance dropped sharply in 2014. In April 2014, it recorded sales worth 125 billion won (15,000 cases), but by October, it had decreased to 40.4 billion won (300 cases).
Experts analyzed that the failure at that time was due to the overly strict eligibility criteria for loan applications, which limited combined household income to 60 million won, as well as the fact that it involved public funds, making it difficult to raise the income criteria for support. Furthermore, the resistance to the very structure of sharing profits with the government when housing prices rise and the complexity of procedures regarding inheritance and loans also contributed to its rejection in the market.
Similar policies gained popularity overseas but have only been utilized to a limited extent. In the United States, shared mortgages were popular during the early 2000s housing price boom but fell into disuse during the housing price decline, becoming a tool for debt restructuring. The U.S. government offered incentives for lending institutions to participate in debt restructuring by forgiving part of the principal of household loans in default in exchange for sharing a portion of the sale profits when housing prices rise.
In the United Kingdom, where the shared mortgage market has been established for a long time, there has been a surge in related consumer complaints. While selling revenue-sharing mortgages, some products from lending institutions demanded excessive profit-sharing, leading to class action lawsuits.
Park Sun-young, a research fellow at the Korea Institute of Insurance Studies, who wrote the report "Current Status and Outlook of Shared Mortgages at Home and Abroad" in 2014, stated, "If shared mortgages are activated, it may temporarily help resolve the rental crisis by expanding the purchasing power of the lower-income class, but it is essential to minimize the possibility of consumer complaints arising from the sales stage." She also emphasized that, "Measures to protect consumers should be devised so that the share of profits for lending institutions does not exceed a certain limit, with caps set according to rising home prices."
The revenue structure is the most critical factor to consider when introducing an equity mortgage. Experts suggest that if interest rates and limits are clearly defined, the choices available to consumers could expand.
Yoon Soo-min, real estate expert at NH Nonghyup Bank, remarked, "Since a similar policy has already fizzled out once, the advantages of revenue sharing must be clearly established for consumers to consider it." He added, "If interest rates are not lowered to below 1% or limits are not significantly increased, the speed and scale of rising home prices will be even faster and larger. Therefore, ensuring clear advantages, maximizing product diversity, and simplifying the structure will be the objectives."