FTC to slash interest rate on late ``mid-payments`` on apartments

The annual interest rate on late "mid-payments" for apartment purchases is expected to fall from the present 19 percent to around 10 percent. The Fair Trade Commission (FTC) said Tuesday that it had notified the Korea Housing Association and the Korea House Builders Association of its intention to issue a correction order in March unless the interest rate is lowered. Mid-payments are the second of the three payments that Koreans typically make when buying a home.

Among the ways that the FTC is considering to lower the rate are: applying the weighted average lending rate at deposit banks, as announced by the Bank of Korea; adding a certain amount of additional interest to the BOK-announced rate; adding five percentage points to the general lending rate. Regardless of its choice, the interest rate is likely to fall to the 10 percent level.

Based on the judgment that current practices, under which builders receive up to 60 percent of the apartment sale price before the completion of construction work, has placed a great burden on consumers, the FTC is also holding negotiations with the Ministry of Construction and Transportation to reduce the mid-payment itself through a revision of housing supply regulations.

Kwon Soon-Hwal shkwon@donga.com