The threshold for jeonse loans for homeowners is expected to rise. The government plans to tighten regulations on these loans, which it believes have contributed to rising housing prices, while selectively supporting first-time buyers and newlyweds who are in genuine need of housing assistance.
President Lee Jae-myung stated at the 'National Real Estate Policy Forum' on July 23, "While jeonse loans are a support policy for stabilizing housing for the working class, it is time to adjust them as they have been a primary cause of skyrocketing housing prices. We need to strengthen regulations on jeonse loans to prevent further price surges."
In the future, the government is likely to apply different regulations based on whether an individual owns a home and their need for a loan, rather than using the same criteria for both homeowners and non-homeowners. President Lee emphasized that the necessity of jeonse loans for homeowners seeking rental properties in other areas should be reassessed.
However, the government plans to exclude certain groups, such as young people, newlyweds, and first-time buyers, from the stricter regulations. President Lee stressed the need for targeted support for these groups, stating that the necessity for loans should be carefully evaluated.
The issue of regulating jeonse deposit return loans was also discussed. Concerns were raised that these loans could alleviate landlords' financial burdens and delay housing price adjustments, while critics argued that tightening regulations could make it harder for tenants to recover their deposits. The key question will be whether exceptions for tenant protection will be established during the upcoming reform process.
Measures to mitigate the impact on existing contract holders who are unable to secure final payments due to household loan limits are also under consideration. Financial authorities plan to discuss protective measures for genuine borrowers with banks.
In addition to directly reducing the limits on housing loans, a proposal to impose additional costs on high-value borrowers was suggested. Kim Young-do, a senior researcher at the Korea Financial Research Institute, proposed a 'macro-prudential management fee' as a means to complement the loan-to-value ratio (LTV) and debt service ratio (DSR) regulations.
The idea is to effectively increase the cost of loans for high-value borrowers to suppress housing demand. Kim cited an example of imposing a 1% fee on a loan of 1 billion won. However, this is an initial idea and not a finalized government proposal.
The possibility that business loans secured by high-value properties could be used to circumvent housing loan regulations is also under review. Financial authorities will verify the actual usage of business loans and strengthen post-use management to prevent misuse.
* This article has been translated by AI.
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