The Financial Services Commission in South Korea is considering applying a zero loan-to-value ratio to mortgage extensions for multiple homeowners, amid ongoing concerns expressed by President Lee Jae-myung about the lending practices.
The Financial Services Commission (FSC) in South Korea is evaluating a policy to apply a 0% loan-to-value (LTV) ratio to mortgage renewals for multiple homeowners, reflecting the ongoing scrutiny from President Lee Jae-myung regarding the lending practices concerning property owners with multiple homes. Lee has drawn attention to the need for stricter regulations on loans to these homeowners, suggesting that the financial authorities need to reduce investment leverage gradually in a bid to ensure a more manageable market. The shift towards a 0% LTV is viewed as part of a broader regime change aimed at curbing speculative investment in the housing market.
On the upcoming meeting scheduled for October 24, the FSC will gather representatives from the five major banks and other financial institutions to discuss reforms regarding mortgage renewals for multiple homeowners. In previous meetings, the officials assessed the current state of multiple homeowner loans, and this time they are expected to delve into concrete measures for reducing the total amount of loans owed by these individuals. The focus is primarily on properties located in the capital region and designated regulated areas, with the intention of selectively applying measures to encourage increased property listings in necessary areas.
Furthermore, the FSC is anticipated to tighten regulations related to residential rental property lenders and the ratio of interest to income, potentially introducing new restrictions on lending to multiple homeowners. This move follows calls from President Lee for greater equity in loan regulations between new purchases and extensions of existing loans. If the same regulations applied to new borrower loans are imposed on existing mortgage extensions, it would essentially mean a significant decrease in borrowing capacity for these homeowners, although estimates suggest that the total volume of loans affected may not be substantial. The emphasis from the authorities is clearly directed towards promoting a healthier and more sustainable real estate market in South Korea.
