Jeonse loans for non-resident homeowners are facing dual pressures as financial authorities consider reducing guarantees for borrowers with properties in regulated areas. This comes as bank funding costs have surged to their highest levels since November 2023.
According to data submitted by the Financial Supervisory Service to Lee In-young of the Democratic Party on June 14, the outstanding balance of jeonse loans for homeowners was 13.2 trillion won as of the end of March, with 89,000 loans issued. Of this, borrowers holding properties in regulated areas, including Seoul, Gwacheon, and Yongin, accounted for 4.9 trillion won. This indicates that nearly 5 trillion won is under scrutiny for potential regulation.
Financial authorities are expected to announce new regulations targeting these borrowers next month. Key measures include reducing the guarantee ratios provided by institutions such as the Korea Housing Guarantee Corporation, Korea Housing Finance Corporation, and SGI Seoul Guarantee. A lower guarantee ratio means banks will bear more risk, potentially leading to stricter loan approval criteria and varying interest rates for borrowers.
There are also discussions about limiting the extension of existing loans for current borrowers. This would particularly affect those classified as speculative borrowers, restricting not only new loans but also the renewal of existing ones. However, it is anticipated that the proposal to include a portion of the principal of jeonse loans in the calculation of the debt service ratio (DSR) will be excluded from this regulation, considering the unique characteristics of jeonse loans.
The challenge lies in the simultaneous rise in bank funding costs. As guarantee ratios decrease, banks face increased lending risks, and if funding costs continue to rise, the pressure on borrowers will intensify. The yield on five-year bank bonds reached 4.473% on June 11, marking the highest level since November 2023.
Authorities are refining criteria for identifying speculative borrowers to ensure that those who own homes for legitimate reasons, such as employment or education, are not caught in the regulatory net. Some non-resident homeowners utilize jeonse loans due to unavoidable circumstances like job relocations or children's education.
A financial industry insider noted, "Even with established criteria for identifying speculative borrowers, the combination of reduced guarantees and rising interest rates may inevitably increase the interest burden on jeonse loan borrowers."
* This article has been translated by AI.
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