Home Loan Criteria Raised Yet Again

From now on, only couples whose combined annual income is less than 30 million won will be eligible for first-time homebuyer loans, according to Minister of Construction and Transportation Choo Byung-jik. The interest on the loan will rise from the current annual 5.2 percent to 5.7 percent.

Choo announced the new regulations at a press conference at the Gwacheon Government Complex yesterday.

It is highly likely that the new regulations will face criticism because this is the third time that first-time homebuyer loan qualifications have been changed in the 3.5 months since starting the government’s housing purchase loan program began.

The revised program tightens the qualifications for eligibility: the current lower limit of a couple’s combined annual income is 50 million won. Starting February 27, couples must earn less than 30 million won per annum to be eligible to apply for the loan.

For households which apply for a loan starting February 23, the present annual loan interest of 5.2 percent will increase by 0.5 percent point to 5.7 percent. Couples whose combined annual income is less than 20 million won will be allowed to borrow up to 100 million won at a 5.2 percent interest rate.

The loan program was launched on November 7 last year as part of the government’s “August 31 Real Estate Measures.” Because so many people have since applied for the loan, the Ministry of Construction and Transportation (MCT) tightened the loan qualifications on January 31 and again on February 6.

“We made the change because we need an additional 7-8 trillion won by the end of this year if we want to continue the program,” said Choo. “I apologize to the public for confusing them.”

The MCT has decided to secure one trillion won in additional financing apart from its 2.5 trillion won budget set aside for the housing purchase loan and others. If the ministry finds the money insufficient, it will request a supplementary budget at a special session of the National Assembly in April and receive a maximum of four trillion won from the National Housing Fund.

Joong-Hyun Park Seung-Heon Lee sanjuck@donga.com ddr@donga.com