[단독] 60% of home loans are not subject to DSR rules… Article 118 ‘Hole’

It was estimated that new home loans from 18 domestic banks in the first half of this year reached 187 trillion won. Among them, it was determined that about 118 trillion won, or more than 60%, were not subject to the full regulation of the Debt Service Ratio (DSR). It is reported that there are holes in the management of household debt, which is considered the biggest threat to the Korean economy.

According to the ‘Status of DSR application for home loans in the financial sector’ sent by People Power Party lawmaker Kim Jae-seop, a member of the Political Affairs Committee of the National Assembly, on the 16th from the Financial Research Service, DSR put in. only 69 trillion won, or 36.7%, of the 187 trillion won in new home loans in the banking sector in the first half of this year. The remaining KRW 118 trillion (63.3%) was not subject to DSR regulations. This is the first time that the volume of new loans and the DSR application rate have been published.

DSR is a key government household debt management tool that incorporates the ‘borrow what you can pay back’ principle. Currently, 40% regulation is applied to banks and 50% regulation to second tier financial institutions. For example, if your annual income is 100 million won, this means that you can borrow up to 40 million won (3.33 million won per month) based on principal and repayment Interest from a bank.

However, as the proportion of home loans to which DSR is not applied appears to be over 60%, there is an analysis that the DSR rules are not properly effective. This is because there are many exceptions that are not subject to DSR when lending. If the borrower’s total loan is less than 100 million won, it is not eligible. Policy mortgages such as Stepping Stone and jeonse loans can also avoid DSR rules. The same applies to down payments, moving expenses, and refinancing (moving) loans.

Looking at the status data, the proportion of loans for policy, jeonse, down payment, and moving expenses among new house loans reached 28.2% (KRW 53 trillion). Other items, including refinance loans, account for 24.3%, while loans of less than 100 million earn account for 8.9%.

Financial authorities have proposed to expand the scope of DSR application as an alternative when the problem of household debt arises. However, it was often overridden by other policy objectives such as ‘supporting ordinary people to buy their own homes’ and ‘stimulating the real estate economy’. Representative Kim said, “Financial authorities must make efforts to improve the effectiveness of DSR regulations.”

Household debt has increased due to the ‘leadership gap’ of loans… As a measure and support, an increase of 30 trillion won this year
Financial Services Commission and Ministry of Lands, Infrastructure and Transport ‘Policy and financial imbalance’… 64% of bank loans are stepping stones and support

A high-ranking official from the financial authorities privately expressed concern in March that “stepping stone loans could be a trigger for household debt.” was not subject to Debt Service Ratio (DSR) regulations.At that time, it was a time when home loans showed stability, declining for two consecutive months.

The worries became reality. The balance of the policy mortgage of the Ministry of Land, Infrastructure and Transport, including stepping stones (purchase) and support (rent), has increased by 3 to 4 trillion won per month this year. As of last month, the balance of stepping stone and support loans had increased by 30 trillion won, accounting for 64% of the total increase in mortgage loans in the banking sector (46.5 trillion won).

○ 92% of loans not referred to DSR for full-time businesses

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The concerns of the financial authorities can be confirmed by looking at the data on ‘Status of DSR application to domestic loans in the financial sector’ sent by the Financial Supervisory Service to People’s Power Party lawmaker Kim Jae-seop, a member of Politics the National Assembly. The Affairs Committee, on the 16th. The ratio of non-DSR home loans, including policy mortgages, was put at 63.3% of the total.

DSR is the borrower’s annual principal and interest repayment divided by annual income. The current rate is 40% for banking and 50% for second tier financial institutions. This means that a person with an annual salary of 100 million won can borrow money from a bank up to 40 million won in principal and interest repayment.

DSR rules only apply to borrowers with total loans of 100 million won or more. Policy mortgages, rental funds, deposits, moving expenses, and microfinance are not subject to regulation. In the new home loans of the banking sector in the first half of this year, the proportion of loans for policy costs, rent, investment and transfer was calculated as 28.2%.

The ratio of loans to which DSR was not applied was higher in secondary financial institutions with loose regulations. The no-claim rate in the credit card industry reached 92.1%. This is because DSR does not apply to cash advances, installments, rent, etc.

○ Policy mortgage mismatch

As a result of the ‘management gap’ there was an increase in household debt. As of September this year, the home loan balance increased by 40.9 trillion won, higher than last year’s total (37.1 trillion won). Last August, he recorded a monthly record of 9.7 trillion won. The total household debt balance was 1,780 trillion won, approaching the size of real domestic product (GDP, 1,996 trillion won).

Housing mortgage loans, including policy mortgages and rental loans, totaled 46.5 trillion won, which was more than all home loans. This means that other loans, such as credit loans, have decreased. That is why there is an analysis that the house debt problem can be solved to a great extent by just managing the policy mortgages and jeonse loans well.

The ‘misalignment’ of mortgage policy between ministries is also believed to be a factor in the rise in housing debt. The Financial Services Commission raised the interest rate of Iasad Bogeumjari, a loan product under its jurisdiction, above the market interest rate, reducing the balance of Iasad Bogeumjari by 16 trillion won this year. On the other hand, the Ministry of Land, Infrastructure and Transport raised the interest rate by 0.2 to 0.4 percentage points only in August after pouring in stepping stone and support loans. The interest rate for step-up loans with a 30-year maturity is 3.95% per annum, which is still lower than the bank mortgage loan rate of 4% per annum.

Homeless people can get Stepping Stone loans with a gross annual income of 60 million won or less. The purpose of the policy is to support ordinary people in buying their own homes. However, there are many complaints that it encourages poor people to take out too many loans.

Park Chun-seong, director of the Macroeconomic Research Department at the Korea Financial Institute, said, “To effectively manage household debt, DSR must be applied to policy mortgages and jeonse loans.”

The government is reviewing various household debt management measures, including expanding the use of DSR. For jeonse loans, we are considering filing a DSR starting from jeonse loans interest for home owners. A plan to apply DSR to jeonse and mortgage policies by differentiating them by housing price, area, and income level is also being considered.

Reporters Kang Hyeon-woo/Jeong So-ram/Choi Han-jong hkang@hankyung.com