“We won’t be able to move into our newlywed home due to loan blockage” Panic in the rental market [전방위 가계빚 조이기]

Strengthening regulations on jeonse loans ‘havoc’
Following the conditional suspension of commercial banks
Government reduces ‘stepping stone’ limit
If a tenant who is about to move cannot borrow money
The landlord also cannot return the existing deposit.

A listing for a real estate agency in Seoul. Photo = Yonhap News

#. “I haven’t been able to sleep for several days. I didn’t know that it would affect me as a homeless person.” Bride-to-be A, who is scheduled to get married next spring, was blocked from renting a lease two months before moving into her newlywed home. It’s hard to know where to get the funds right now. “Even today, I’m looking into second-tier financial institutions, but they haven’t given me a definitive answer. How can they roll out a policy like this without a grace period or prior notice?”

#. Mr. B, who moved into a newly built apartment in Seoul last week on a lease basis, almost lost tens of millions of won in deposit money. In early September, when I saw an article about the regulation of conditional jeonse loans and inquired with the bank, I received a reply saying, ‘The loan will likely be blocked in two days, so let’s proceed immediately.’ I managed to get a loan payment a month before moving, but the loan limit was reduced, so I got 20 million won less.

A red light has turned on in the fall moving season rental market. As the government tightens household loans, tenants who are about to move are blocked from receiving loans. Confusion seems to be continuing like dominoes, with landlords who were waiting for a new tenant’s deposit for rent also struggling to prepare the deposit to return to the existing tenant who is moving out.

On the 17th, concerns arose in the real estate industry that the housing ladder of the common people is in jeopardy, as stepping stone and support loans for low-income people who do not own a house are at risk of being reduced following the recent strengthening of banks’ regulations on various rental loans. In accordance with the government’s household loan management policy, commercial banks began strengthening the review of jeonse loan loans about two months ago. Starting from the end of August, banks began to stop providing conditional rental loans that pay the balance with the tenant’s rental deposit. Although the policy is intended to prevent so-called ‘gap investment’ of buying a house with a lease, both landlords and tenants who have completed their contracts are experiencing setbacks in their financial plans.

In addition, as the Ministry of Land, Infrastructure and Transport and the Housing and Urban Guarantee Corporation (HUG) sent an official letter requesting restrictions on handling of stepping stone loans to commercial banks that handle housing and urban fund loans, young people and ordinary people are stamping their feet. Inquiries and complaints from end-users are pouring into various online real estate-related communities. One netizen expressed, “I’m sad that it’s getting difficult to get a loan. Should I postpone my wedding? I feel like I’m sitting on a thorn cushion all day.” A landlord who had signed a contract at the end of this month expressed his impatience, saying, “The bank is not providing a lease loan due to the tenant’s circumstances. How do I raise the deposit for the existing tenant?”

Market uncertainty is expected to grow further as the government is considering expanding the application of the total debt service ratio (DSR) to leasehold loans of tenants who own their own homes within this year. Mr. C, who owns one home, said in tears, “I own a house, but I will soon have to rent it out near my workplace, but I am worried because I have not been able to get a loan.”

Experts agreed that the sudden expansion of lending regulations would be a major blow to beneficial owners.

Kwon Dae-jung, a professor of real estate at Sogang University, emphasized, “I understand the intention to manage household debt, but loans must be provided to those who do not own a home, even if the interest rate is higher.”

Choi Hwang-soo, professor of real estate at Konkuk University, also pointed out, “Controversy is arising because we are trying to solve the problem by touching on the aspect of loan regulation rather than managing household debt through a normal system.”

ming@fnnews.com Reporter Jeon Min-kyung

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