As the limit on housing collateral loans (dwellings loans) in the metropolitan area and regulated regions is restricted to 600 million won, it appears that the loan eligibility for financial consumers with an annual salary of 200 million won has halved. Until now, high-income earners were able to secure loans worth billions, purchasing expensive dwellings in the key areas of Gangnam (Gangnam, Seocho, Songpa) and Yongsan. However, it is projected that buying a home will become difficult without significant cash savings. This will likely have a significant impact on the younger demographic in their 20s and 30s, who have relatively less cash on hand.
According to simulations by commercial banks on the 27th, the maximum loan amount for financial consumers with an annual salary of 200 million won borrowing a dwelling loan in the metropolitan area will decrease from 1.148 billion won (applying 3-stage stress Debt Service Ratio) to 600 million won, a reduction of approximately 550 million won. The new dwelling loan conditions are assumed to be 'annual 4.20% variable interest rate, 30 years partitioning, equal principal and interest repayment.' For financial consumers with an annual salary of 150 million won, the loan eligibility will drop from 861 million won to 600 million won under the same conditions.
On the other hand, the reduction in loan limits for financial consumers with an annual salary of 100 million won or less was not significant. According to the Financial Services Commission's report on 'Comparative Analysis of Loan Eligibility and Limit Reductions for Financial Consumers Before and After Regulation Implementation,' the loan limit for financial consumers with an annual salary of 60 million won was 419 million won, unaffected by the '6 million won dwelling loan limit' regulation. This is the loan limit calculated using DSR with 'annual 4% interest rate, 30 years partitioning.' For financial consumers with an annual salary of 100 million won, the loan limit decreased slightly from 698 million won to 600 million won.
Until recently, loans could be obtained freely under the principle of 'borrowing as much as can be repaid,' as long as the loan-to-value ratio (LTV) of 50-70% and Debt Service Ratio (DSR) of 40% were maintained. If the income was high, it was possible to take out large loans.
However, as cases of purchasing dwellings with loans worth billions became more frequent, pushing up housing prices, it seems the government took the drastic step of capping the loan limit at 600 million won, irrespective of financial consumers' income or housing prices. Earlier, on March 30, an individual surnamed A purchased a Raemian One Bailey apartment in Seocho-gu, Seoul, for 5.9 billion won, and the registered collateral for this dwelling was reported to be around 2.7 billion won, leading to controversy.
It is anticipated that substantial cash will now be necessary to purchase a home in the metropolitan area. Ham Young-jin, head of real estate research at Woori Bank, noted, "I believe this is a strong credit regulation policy that exceeds the 3-stage stress DSR regulation," adding, "In a situation where the average price per apartment along the Han River approaches about 1.5 billion won, without preparing around 900 million to 1 billion won of own capital, purchasing dwellings through loans will become difficult."
The generation that is expected to be hit the hardest is those in their 20s and 30s. There are concerns that the 'housing ladder' for the younger demographic may be shaking. Shin Jin-chang, head of the Financial Policy Division at the Financial Services Commission, stated, "When taking a 30-year loan of 600 million won, the monthly average repayment (principal + interest) would be 3 million won. Compared to the average household income, this is a burdensome amount," and noted, "At some point, this cycle must be broken, making it inevitable to take such measures at least once. If these efforts are consistently maintained, it is expected that housing prices will stabilize."