Government Considering Raising Interest Rate on Mortgage Loans in Gang Nam

The Korean government is considering raising the interest rate on mortgage loans in certain districts where the housing price is skyrocketing, including Gang Nam, Seoul.

Also, allowing more self-supporting private high schools to enhance the educational environment in non-Gang Nam districts in order to boost the housing market in these areas is also under consideration.

Holding an economy ministerial talk organized by the Deputy Prime Minister and the Minister of Finance and Economy Kim Jin-Pyo on October 12, the government discussed the measures and decided to unveil detailed policies addressing these issues.

The ministers reached a consensus that the education problem was the main cause of soaring housing prices in certain areas as well as the contraction of consumer spending.

To address the situation, the Ministry of Finance and Economy is consulting with the Ministry of Education and Human Resources Development to consider switching private schools into self-supporting schools.

The government also is planning to reduce mortgage loan percentage from 50 percent to 40 percent in certain areas.

When this becomes realized, an expected 6 trillion won of the 30.2 trillion won mortgage loaned money should be collected immediately.

In response to this plan, Kookmin Bank decided to raise the interest rate of mortgage loans in the bubbling areas by up to 1 percent.

In the meantime, Chairman of the Bank of Korea (BOK) Park Sueng warned that concerns over the overheated housing market has been raised as housing price is soaring due to low interest rates.

Park added, “BOK is consistent with a low interest rate policy to boost the economy. But now we need to be cautious about market instability.”