To control housing prices in the metropolitan area, the government has decided not to implement additional income criteria relaxations for the newborn special loan, alongside reducing policy loans such as Step Loan and Buffer Loan.
According to the Ministry of Land, Infrastructure and Transport on the 30th, the government has decided not to further relax the income requirement for the newborn special loan from the combined income of 200 million won for couples.
Earlier, the administration of Yoon Suk-yeol announced in June last year measures to reverse the declining birth rate, stating that the combined income requirement for couples to qualify for the newborn loan would be increased to 250 million won starting this year, but this will not be implemented. Many have pointed out that the relaxed loan requirements contribute to rising housing prices, and as the scale of policy loans has surged, the housing & urban fund is rapidly being depleted.
The newborn special loan is a system that offers up to 500 million won at low interest rates for households that have given birth or adopted within two years of the loan application date, whether they are non-homeowners or homeowners (refinancing). It was introduced on January 29 last year, targeting dwellings with a size of 85㎡ and priced below 900 million won.
With the aim of increasing the birth rate, initially, a low-interest loan of about 1% was available for couples with a combined annual income of up to 130 million won. However, less than five months after the launch, the government announced two rounds of relaxations to the income criteria.
During every president-led public discussion and announcements of multi-agency measures to address the low birth rate, there were instances where the expansion of the 'income standard of 200 million won' was discussed before the announcement of the 'increase to 250 million won'.
After raising the income requirement to 200 million won in December last year, the amount applied for the newborn loan (including purchase and rental funds) rose sharply to 1 trillion won per month.
According to data submitted by the Ministry of Land, Infrastructure and Transport to Lee Yeon-hee, a lawmaker of the Democratic Party of Korea, the amount applied for the newborn loan increased from 1 trillion 439 billion won in January this year to 1 trillion 432.3 billion won in March, when housing prices surged due to the lifting of land transaction permit areas. In April, it recorded 1 trillion 223.2 billion won, and in May, 1 trillion 407.3 billion won.
From the launch of the newborn loan until the end of May this year, the total amount disbursed over 1 year and 4 months was 14.4781 trillion won. The Step Loan for purchase funds accounted for 10.9259 trillion won, while the Buffer Loan for rent amounted to 3.5522 trillion won.
The government had planned to temporarily raise the income criteria to 250 million won for households that give birth between 2025 and 2027, allowing high-income dual-income couples to access low-interest policy loans, but this has been abandoned amid the tightening of policy loans.
Starting next month, the government will reduce the total amount of policy loans by 25% compared to the existing supply plan. As of the 28th, the limit for the newborn special Step Loan has been reduced from 500 million won to 400 million won, and the Buffer Loan limit has also decreased from 300 million won to 240 million won.