Reducing Mortgage Loan Rates to 40 Percent

The government is discussing in depth over the financial and monetary policy to lower housing mortgage loan limit or to limit the total amount of housing mortgage loans and reduce interest rates in order to control the rising housing prices.

“Presently, the housing price rise in Seoul, including the Gangnam area, is almost like a money game without any actual demand,” spoke Choi, Jong-chan, Minister of Construction and Transportation, at the press conference on October 8. He added, “We are working to establish conditions to make it hard to receive bank loans, to increase fees related to bank loans, or not to profit much from buying houses when one wants to buy a house.”

The government is already looking at the possibility of further decreasing the housing mortgage loan percentage from an already decreased rate of 50 percent to 40 percent or limiting bank loans. Minister Choi emphasized, “There are many considerations to be made since there is talk that the recent housing price increase is a national phenomenon, and if we increase the interest rate, it will help the housing market stabilize but will affect the entire economy. We are mustering up all our knowledge and wisdom to suggest the most reasonable policy, by doing a lot of statistical research.” He mentioned, “Controlling the installment sale price can work to restrain supply rather than demand, and it might shrink the supply and cause the price to rise up. Simply lowering the original price would not make buyers disappear.” Minister Choi added, “The current housing price increase arose because people were confused when the interest rate was lowered from a higher rate which that they were used to, and we are getting signs of a dangerous state indicating an excessively high price. We have to be prepared for side effects when the price gets lower again.”

Meanwhile, Kim, Suk-dong, director of Supervisory Policy 1 from Financial Supervisory Commission, replied when asked to comment on the policy of managing housing mortgage loan rates by the Ministry of Finance and Economy, “This directly affects the profit of banks, and it is difficult to control real estate prices with supervisory rules,” revealing the difficulty of implementing the policy. Director Kim said, “The problem is wide-spread flexibility in the market, and this can be solved only by the interest rate management.”

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