South Korea's financial authorities have decided to allow multiple-home owners to access credit loans of up to 10 million won that are exempt from annual income-based limits.
According to financial industry sources on Friday, the financial authorities notified financial institutions a day earlier that multiple-home owners would be included as eligible borrowers for living stability loans designated for mid- and low-credit borrowers, which are not subject to annual income limits. The Financial Services Commission (FSC) had previously announced that the product would be offered to borrowers in the bottom 50% of credit scores while excluding multiple-home owners, but it has now revised that guideline.
The authorities reportedly took into account that demand for emergency living funds can arise regardless of how many homes a borrower owns. The decision also appears to reflect the wide variation in asset size depending on the type and location of housing, as well as the complexity for individual financial institutions in verifying multiple-home ownership.
The loan will be rolled out across the financial industry in stages, starting with the savings bank sector on the 29th. The Korea Federation of Banks sent an official letter to each bank on the 26th of last month requesting that they accelerate product development. The National Agricultural Cooperative Federation and the National Credit Union Federation of Korea have also begun developing the product. Interest rates will be set at the average level of credit loan rates within each sector. Credit loan rates are currently in the mid-to-high 10% range in the savings bank sector and around 4 to 5% at banks.
The debt service ratio (DSR) regulation will be applied in the same manner as for ordinary credit loans. When the loan is executed, borrowers must sign an agreement pledging not to purchase a home for the next year. However, some observers have raised concerns that the loans could attract demand from borrowers seeking funds for "debt-financed investment."
