Starting in May, it is expected to become more difficult to obtain loans. The guarantee ratio for household funds loans is being lowered from this month, and in July, the third phase of the debt service ratio (DSR) will be implemented. To prevent a rush of 'last minute demand,' banks are likely to raise the threshold for household loans.
According to the financial sector on the 2nd, from this month, the guarantee ratio for jeonse (lease) loans from the Korea Housing & Urban Guarantee Corporation (HUG) and SGI Seoul Guarantee will be reduced from the previous 100% to 90%. It was initially scheduled to be implemented in July, but criticism arose that the guarantee ratio was excessively high, encouraging indiscriminate jeonse loans, leading to the advanced change by two months.
The guarantee for jeonse loans is a product that ensures loan repayment when a jeonse tenant borrows from a bank, guaranteed by insurance institutions such as SGI Seoul Guarantee, HUG, and HF. Since the ratio guaranteed by these institutions is lowered, banks have no choice but to strengthen loan assessments. Until now, if the tenant could not repay the jeonse loan, these institutions repaid 100% of the loan, but now they can only recover 90%.
Starting in June, HUG will consider the tenant's repayment ability during the assessment of the Jeonse Deposit Safe Loan Guarantee. This guarantee product is jointly responsible for returning the jeonse deposit to the tenant and for the principal and interest repayment of the household funds loan to financial institutions. Currently, guarantees are available within 80% of the jeonse deposit, with 400 million won in the metropolitan area and 320 million won in non-metropolitan areas, but it has been decided to include the tenant's repayment ability in the assessment criteria for the guarantee limit to prevent excessive jeonse loans.
Starting in July, the third phase of the stress DSR will be implemented. This follows the introduction of the first phase in February and the second phase in September of last year, occurring 10 months later. The DSR refers to the proportion of annual income used to repay loan principal and interest, and currently, a 40% DSR regulation is applied to bank loans. Stress DSR, which adds a kind of additional interest rate known as the stress rate, will increase by an interest rate of 1.5% for housing mortgage loans, credit loans, and other loans in both the banking sector and the secondary financial sector in the third phase. Currently, a total interest rate of 0.75% is applied to calculate the DSR of the borrower (the person who borrowed money), based on bank housing mortgage loans, credit loans, and housing mortgage loans in the secondary financial sector.
If the borrower's income remains the same, the introduction of the third phase of the stress DSR will inevitably reduce the loan limit. Let's assume a financial consumer with an annual income of 100 million won takes out a housing mortgage loan with a maturity of 30 years, a mixed type (5 years), and a partitioning repayment condition. When applying an interest rate of 4.5%, currently under the second phase, the limit for metropolitan areas is 660 million won and 624 million won for non-metropolitan areas. When the third phase is implemented, the limit will be reduced to 594 million won regardless of the region. Under a variable interest rate, the limit may drop to 556 million won.
There is a possibility that banks will tighten regulations on household loans. Last month, household loans in the financial sector surged by about 5 trillion won, raising concerns about household debt concentration. In particular, there may be significant last-minute demand for loans before the loan limit decreases due to the implementation of the third phase of the stress DSR regulation. A representative from a major bank noted, "While the loan regulations we loosened at the beginning of the year are being tightened again, we will monitor household loan trends in May and June and may consider additional regulations if necessary."