Gov¡¯t to stabilize housing rental market

Following the steep rise in lease deposits, the government`s support loan interest rate for new lessees is to be decreased to 7%.

With the moving season coming up, rental deposits in Seoul and other metropolitan areas are showing signs of increasing further. In order to alleviate this situation, the government is formulating a lease market stabilization plan, which includes the reduction of the support fund interest rate from 8.5% to 7.75%.

The Ministry of Construction and Transportation has made necessary amendments to National Housing Funds in this regard and a measure to decrease loan interest rates has been included. However, further interest rate reductions for worker lease deposit loans will not be considered.

Apparently, the recent rise in lease deposit prices was brought on by the lack of small sized homes, and the MCT is considering increasing the supply of residences 18 pyong or smaller.

An official from MCT claimed that the present rise in lease deposit prices is not a serious problem and the decrease in lease deposit loan interest rates was merely a preemptive action facing the moving season.

People who moved into homes on lease deposits during the 1998 foreign currency crisis received good deals, but as lease deposit prices surged, these lessees are having trouble paying the higher amounts. Hence, the government initiated a program in March to assist lessees who are having trouble raising funds, with loan support of up to 50% of the raised amount (limited to 20 million won per household) at interest rates of 8.5%, but due to the high rate it has been criticized for its lack of effectiveness.