Yonhap News
The size of stepping stone loans, policy loans for home purchases, executed this year amounted to 22 trillion won, an increase of 2.7 times compared to the same period last year. The amount of applications for special stepping stone loans for newborns exceeded 10 trillion won this month.
The reason why demand was concentrated for stepping stone loans is because the two major housing policy loans, Stepping Stone, are operated in opposite directions, with ‘expansion’ and ‘reduction’ for Bogeumjari loans.
The government tried to tighten stepping stone loans to control household loans and housing prices, but was met with strong opposition.
According to data submitted by the Ministry of Land, Infrastructure and Transport on the 27th to Representative Lee Yeon-hee of the Democratic Party of Korea on the Land, Infrastructure and Transport Committee of the National Assembly, stepping stone and support loans, which are policy loans financed by the Housing and Urban Fund, were executed at KRW 42.0847 trillion from January to September this year. The size increased by 14.3979 trillion won (51.5%) compared to the same period last year (27.7868 trillion won).
In particular, the increase in stepping stone loans is steep. The loan amount amounted to 22.32 trillion won from January to September this year, a 2.7-fold increase from the same period last year (8.1196 trillion won).
The size of support loans for jeonse funds amounted to KRW 19.7645 trillion from January to September this year, an explosive increase compared to the similar period last year (KRW 19.6672 trillion).
The influx of demand for stepping stone loans is believed to be the result of a combination of the ‘balloon effect’ caused by Bogeumjari loans and the tightening of commercial bank loans, lower loan interest rates than commercial banks, and easing income requirements. Stepping Stone Loan (general type) is a representative policy finance product for the common people that lends up to 250 million won at an interest rate of 2-3% per annum when a homeless person with an annual income of less than 60 million won buys a house worth less than 500 million won. Because there are restrictions on income requirements and housing prices, it is mainly used by homebuyers in Gyeonggi, Incheon, and other regions rather than Seoul.
Last year’s policy loans were concentrated on special mortgage loans managed by the Financial Services Commission. As interest rates rose and house prices began to decline from the end of 2022, the government provided a special housing loan of up to 500 million won when purchasing a house worth 900 million won or less, regardless of income, for a limited time for one year from January last year. The amount executed was 41.8336 trillion won.
As household debt increased after the launch of the special housing loan, which is not subject to the total debt service ratio (DSR), the government suspended general-type loans for housing prices of 600 to 900 million won in September last year and extended preferential loans for housing prices of 600 million to 900 million won. We took steps to reduce our operations to only lending.
Starting this year, the annual income standard (70 million won for couples and 85 million won for newlyweds) and housing price standard (600 million won) have been set to the level of existing nest loans.
As interest rates did not differ significantly compared to commercial banks, the amount of loans plummeted. The current Bogeumjari loan interest rate is 3.95-4.25% per year based on ‘Akim e-Bogeumjari Loan’. The size of new Bogeumjari loan executions from January to August this year was 3.3 trillion won, a significant decrease from 42.6 trillion won last year.
Meanwhile, the requirements for stepping stone loans under the jurisdiction of the Ministry of Land, Infrastructure and Transport continued to be relaxed. The income requirements for stepping stone loans for newlyweds have been expanded from a combined annual income of 70 million won to 85 million won since October last year. The combined income requirement for couples for the special stepping stone loan for newborns, launched in January this year, is 130 million won, and the Ministry of Land, Infrastructure and Transport plans to raise the income standard to 200 million won within this year. It was even proposed to increase the amount to 250 million won for households giving birth between next year and 2027.
The newborn special loan provides a loan of up to 500 million won when a non-homeowner who gave birth or adopted a child within two years of the loan application date purchases a house worth 900 million won or less. The lowest interest rate is 1.6% per year. The interest rates on home mortgage loans from commercial banks have risen, but the interest rates on stepping stone loans have been maintained at 2-3% per year, and as low-interest products of as low as 1% have been introduced, demand has surged.
The application amount for the special loan for newborns exceeded 10 trillion won in just 9 months after its launch on January 29th of this year. As of the 21st of this month, a total of 39,456 loan applications worth 10.1779 trillion won were received. Stepping stone (purchase) applications amount to KRW 7.732 trillion, and support (lease) amounts to KRW 2.4459 trillion.
This is why the government, which is trying to manage household debt, raised the stepping stone loan interest rate by up to 0.4 percentage points to 2.35-3.95% per annum last August and then went so far as to reduce the loan limit. The government needs to manage the scale of policy loans to control the rapidly increasing household loans, but it is difficult to tighten policy loans for low-income housing.
Reporter Lee Yoon-hee stels@dt.co.kr
