Monthly house rental interest to be limited to 15% annually.

Government decided to fasten the interest rate, which is applied for changing the lease of a house on a deposit basis to monthly rent as maximum of 15 percent per annum (monthly 1.25 percent)

Official in Ministry of Justice stated on 27th, “we are positively examining the highest limit of interest rate as 15 percent, as ministry of finance and economy (M.F.C) suggested to fasten the highest limit of interest rate, which is applied to change the lease of a house on a deposits basis to monthly rent, to annual 15 percent in the negotiation of related ministries like Ministry of Finance and Economy and Ministry of Construction and Transportation (MOCT)” and “we will announce it after confirming soon”

MOFC suggested 15 percent annually after considering △ 6.9 percent annual average loan interest for one year loan by banks in last December △ 3.0 percent as the target for the controlling inflation this year △ 5 percent of depreciation rate.

However, the criticism that it will be difficult to get effect on fixing artificial highest limit for monthly rent, as it is decided by market is also quite high.

Protection law on house rent, which was revised last year end, regulated that enforcement ordinance should decide interest, which is applied to change the lease of a house on a deposit basis to monthly rent, considering bank interest and economic situation.

Highest limit of monthly rental interest is applied when house owner tries to change the lease of a house on a deposit basis to monthly rent after expiry of 2 years contract and it is not applicable between periods of contract.

According to MOCT, current monthly house rental interest in nationwide cities in January is 14.88 percent annually (monthly 1.24 percent) however there is gap in regions as Seoul make up 1.1 percent and local middle cities, 1.39 percent.

However interest demanded by house owners when contract for the lease of a house on deposit basis expires and is changed into monthly rent reaches 13.5 percent per annum on an average.

hcs@donga.com