If a bank executes a mortgage loan of 400 million won or more, the Housing and Urban Guarantee Corporation (HUG) grants rate is expected to be raised significantly. As the grants rate rises, banks' burdens will grow, and the threshold for dwellings loans will naturally increase.
According to the financial authorities on the 23rd, a draft amendment to the Enforcement Rule of the Korea Housing Finance Corporation Act that would apply HUG differentially by loan amount when banks handle large dwellings loans could be submitted to a Cabinet meeting agenda as early as this week.
Currently, the Financial Services Commission sets the HUG grants rate at 0.03%–0.30% by loan type, such as fixed-rate and variable-rate loans. The amendment changes the basis for the HUG grants rate to the loan amount.
Specifically, if the loan amount is at or below 0.5 times the average loan amount, a 0.05% grants rate applies; if it exceeds twice the average, a 0.30% rate applies. The average loan amount per borrower was 233 million won in 2024, and last year is estimated to have been in the low 200 million won range, which is lower. Given this, when extending dwellings loans over 400 million won, banks' grants burdens will increase. The amendment will take effect next month after Cabinet approval.
Once the amendment takes effect, banks are expected to refrain from actively marketing large dwellings loans. Measures such as tightening reviews for large dwellings loans are being discussed.
In the banking sector, the view is that, once the amendment takes effect, end users purchasing apartments priced at up to 1.5 billion won in the Seoul metropolitan area—where loans can go up to 600 million won—will be primarily affected. Apartments over 1.5 billion won are not expected to be affected by this regulation because the loan limit is capped at 400 million won, and those over 2.5 billion won are limited to 200 million won.
An official at a commercial bank said, "If the grants rate goes up, bank profits will fall, so reviews for large dwellings loans will likely be more conservative."