With financial authorities set to announce regulations next month restricting jeonse (a Korean lease system requiring a large lump-sum deposit instead of monthly rent) loans for speculative non-resident one-home owners, borrowers holding apartments in regulated zones are expected to be the target.
According to the office of Rep. Lee In-young of the Democratic Party, a member of the National Assembly's National Policy Committee, the outstanding balance of bank jeonse loans held by one-home owners totaled 13.2 trillion won as of the end of March, the office said Wednesday. The figure represented 89,000 loans.
Among these, broken down by location of the homes held by borrowers in the greater Seoul area, Seoul accounted for 3.2 trillion won (20,000 cases), Incheon 1 trillion won (7,000 cases), and Gyeonggi Province 5 trillion won (33,000 cases).
Within the greater Seoul area, the outstanding jeonse loan balance held by borrowers owning apartments in regulated zones—comprising all 25 districts of Seoul and 12 locations in Gyeonggi Province including Gwacheon and Yongin—stood at 4.9 trillion won. Both inside and outside financial authorities, there is talk that these borrowers will be the subject of the non-resident one-home regulations.
Authorities are expected to restrict the supply of jeonse loans to speculative non-resident one-home owners. Bank jeonse loans must receive guarantees from public guarantee institutions such as the Korea Housing & Urban Guarantee Corporation (HUG), the Korea Housing Finance Corporation (HF), and SGI Seoul Guarantee.
Options under discussion include banning guarantees or further lowering the guarantee ratio from the current 80 percent. If guarantees are banned, it would effectively become difficult to obtain jeonse loans from banks. A regulation reflecting part of the jeonse loan principal in calculating the debt service ratio (DSR) has reportedly been excluded from consideration.
