Financial authorities are reviewing ways to support final-payment loans for residents moving into newly built apartments but are said to be planning to exclude buyers of existing apartments from eligibility. Easing the loan-to-value (LTV) ratio for end users such as young adults and newlyweds is also not expected to move forward on the grounds that it could stimulate home prices.
According to financial authorities on the 2nd, the Financial Services Commission is reviewing measures to resolve the problem of prospective residents of newly built apartments being unable to obtain final-payment loans due to tighter total volume controls on banks' household loans.
At a real estate policy forum chaired by the president last month, the issue of final-payment loans emerged as a key agenda item after it became known that an allottee at the newly built "Maegyo Station Pellucid" in Suwon, Gyeonggi Province, could not secure a final-payment loan. At the time, financial authorities said they would prepare targeted support measures to reduce inconvenience for end users such as young adults and newlyweds.
However, it is reported that people who purchased existing apartments will not be included as eligible for support. The judgment is that it is difficult to provide the same support to allottees who applied before the June 27 lending regulations last year and prepared to move in, and to those who purchased existing dwellings after the tightening of regulations.
The government's stance of expanding the supply of dwellings also played a role. The view is that final-payment loans for newly built apartments must be provided smoothly for move-ins and the supply of dwellings to proceed without disruption.
A financial authority official said, "Final payments must be supplied normally for move-ins to newly built apartments to be possible," adding, "From the perspective of supplying dwellings as well, the issue of final-payment loans in group lending needs to be resolved."
On the 28th of last month, financial authorities summoned officials from the five major banks—KB Kookmin, Shinhan, Hana, Woori and NH Nonghyup—and asked them to cooperate so that final-payment loans would be supplied smoothly to end users set to move into newly built apartments.
As a result, it is understood that, at present, group final-payment loans are being supplied to some newly built complexes such as Maegyo Station Pellucid at each bank's discretion.
In the market, some also argue that excluding buyers of existing apartments from eligibility is inequitable. As with allottees, many set up funding plans in line with current regulations but are having trouble preparing final payments due to banks' loan cutbacks.
The burden on banks' total volume control of household loans could also increase. There are projections that expanding the supply of final-payment loans for newly built apartments could make it difficult for banks to meet this year's household loans growth rate target of 1.5%.
Financial authorities are currently estimating the demand for final-payment loans for newly built apartments in the second half and the resulting net increase in household loans.
Easing the LTV for end users has been excluded from the agenda. Under the June 27 measures last year, the LTV for mortgage loan borrowing to purchase a first-ever dwelling in the Seoul metropolitan area and regulated zones was lowered to 70% from 80%. Didimdol loans and Bogeumjari loans were subject to the same standard.
Then, under the Oct. 15 measures last year, the LTV applied when a person without a dwelling takes out a mortgage loan in a regulated zone was reduced to 40% from 70%.
On the real estate policy forum message board, which operated until the end of last month, there were successive calls to ease the 600 million won loan limit for first-time homebuyers, or to expand preferential treatment for the debt service ratio (DSR) and LTV.
Proposals also included expanding low-interest loans for first-time buyers, creating a youth-only LTV band, maintaining mortgage insurance for newlyweds' mortgage loans, easing standards for final-payment loans, and expanding recognition of future income that reflects young adults' prospective earnings.
However, financial authorities believe that easing the LTV when the supply of dwellings is insufficient could increase loan demand and push home prices back up. They judge that reversing tightened lending regulations during a price upswing does not align with policy principles aimed at stabilizing home prices.
The government is putting more weight on expanding financial support for suppliers rather than easing borrower-side lending regulations. Options under review include increasing the amount of public guarantees for project financing (PF) on non-apartment dwelling supply projects to reduce developers' funding burdens.
Housing finance measures by the Financial Services Commission and the Ministry of Land, Infrastructure and Transport are expected to be released after the government announces its tax reform plan. In the market, there is talk that related measures could be announced around midmonth.