Korea’s Mortgage Curbs Hit Policy Loans as Didimdol, Bogeumjari Lending Slumps

The government’s continued tightening of mortgage lending has sharply reduced the volume of policy loans such as Didimdol and Bogeumjari, with lending down by about half. With authorities capping this year’s growth in household lending — including policy loans — at 1.5%, the lending squeeze is expected to deepen. 

According to the financial sector on Monday, 4,567 first-time homebuyer Didimdol loans were issued from November through February. That was down 57.9% from 10,844 in the same period a year earlier. The total amount also fell 67.8%, to 651.8 billion won from 2.0212 trillion won. 

The drop is widely attributed to tighter eligibility rules introduced last year under the government’s household lending cap. Under the June 27 measures, the loan-to-value ratio for first-time home purchase mortgages in the Seoul metropolitan area and other regulated zones was lowered to 70% from 80%, and the change was applied to policy loans as well. The maximum Didimdol loan limit for first-time buyers was also cut to 240 million won from 300 million won. 

Didimdol loans for general households and newlyweds have also weakened. Applications for general-household Didimdol loans averaged 1,424 a month in 2023 during the Yoon Suk Yeol administration, but fell to a monthly average of 528 in the second half of last year after President Lee Jae-myung took office. Newlywed Didimdol applications were 2,493 in 2023 and 3,798 in 2024, then dropped to 2,067 in the second half of last year. The loan amount rose from 588 billion won in 2023 to 960.5 billion won in 2024, before sliding to 382.8 billion won in the second half of last year. 

Analysts say funding options for end users are narrowing as borrowing hurdles rise under the current government, including a cut in the loan limit for newlywed Bogeumjari loans to 150 million won from 200 million won and a reduction in the guarantee ratio for jeonse loans in the Seoul metropolitan area and other regulated zones to 80% from 90%. 

Bogeumjari loans have also declined. Last year, applications — including special programs for newborns — totaled 135,043 cases, down 46% from a year earlier. The loan amount, which was 12.3288 trillion won in 2022, surged to 26 trillion won in 2023 but fell to 13.5043 trillion won last year. 

A financial industry official said the lower guarantee ratio reduced loan limits, contributing to the decline in policy lending. The official added that while standards such as home price and floor area remain unchanged, faster home price increases have also played a role. 

Policy lending is likely to shrink further this year. The Financial Services Commission has limited annual growth in household lending, including policy loans, to 1.5%, leaving banks little choice but to scale back policy-finance products.