Over the past roughly five years, in-house dwelling financing loans handled by financial public institutions under the Financial Services Commission amounted to about 50 billion won. In-house dwelling loans are exempt from both the debt service ratio (DSR) and the maximum 600 million won mortgage loan cap regulation.
Three of the seven financial public institutions were lending amounts above the cap (70 million won) at low interest rates despite the government's guidelines. The maximum limit for in-house dwelling loans at the Korea Asset Management Corporation (KAMCO) was 160 million won, with an annual interest rate of 3.3%. As of last month, the average mortgage rate at the five major banks was 4% to 4.11% per year.
According to materials on in-house dwelling loans submitted by seven financial public institutions under the Financial Services Commission to the office of People Power Party lawmaker Kim Sang-hun on the 13th, the total amount of loans handled from 2020 through September this year was about 48.5 billion won. Since 2020, Industrial Bank of Korea has effectively halted in-house dwelling loans after controversy erupted over lax in-house lending practices at public institutions. The Korea Inclusive Finance Agency (KINFA) does not operate an in-house loan system.
Among the remaining five financial public institutions, the Korea Development Bank handled the most dwelling loans. KDB's dwelling loans over the same period totaled 27.4 billion won, accounting for half of the total. Annual loan amounts fell from 9.1 billion won in 2020, 8.8 billion won in 2021, 4.2 billion won in 2022, 1.5 billion won in 2023, to 1.4 billion won in 2024, then began rising again this year as regulatory thresholds tightened. Through last month, dwelling loans handled reached 2.4 billion won, about a 70% increase from a year earlier.
KDB also did not follow the government's guidelines. Under the Ministry of Economy and Finance's 2021 "public institution innovation guidelines," the in-house dwelling loan limit must be 70 million won or less per person, and the loan rate must be at least the Bank of Korea-published bank household funds lending rate. However, KDB's dwelling loan cap is 100 million won, exceeding the standard. KDB said, "In June we revised our loan bylaws to lower the limits for dwelling lease financing loans and dwelling purchase financing loans to 70 million won," adding, "Implementation is planned within the year after completing system development and other preparations."
KAMCO handled 9.1 billion won in in-house dwelling loans since 2020 despite the government's corrective recommendation. KAMCO's dwelling loan volume has increased every year. Dwelling loans that were under 500 million won in 2020 rose to 1.4 billion won in 2022 and 2.4 billion won in 2023, and 2.4 billion won in loans were executed through last month this year. KAMCO's dwelling loan cap is up to 160 million won, more than double the guideline. The interest rate is 3.3%, about 1 percentage point lower than other public institutions. The Korea Credit Guarantee Fund (KODIT) also had a loan limit of 130 million won per person.
Even though years have passed since the government recommended implementing the guidelines, financial public institutions have been reluctant to revise their loan bylaws, saying that welfare benefits are matters for labor-management agreement at each corporation and cannot be changed lightly. There is criticism that employees at public institutions, who should take the lead in implementing government policy, are in fact receiving preferential treatment by taking out more than 100 million won in in-house dwelling loans. Critics also say this fuels a sense of relative deprivation among the general public.
Lawmaker Kim Sang-hun said, "Ordinary people find it hard to get loans, while employees of financial public institutions, whose average annual salary exceeds 100 million won, are borrowing large sums at low rates in a blind spot of lending regulations," adding, "The government should not only tighten private-sector lending regulations but also examine the lax in-house lending practices at public institutions."