Multiple house owners under pressure…Household debt increase rate to be controlled within 8%
[ Kim Dong Wook east@ ] | 2017-10-25 10:36:48
10ㆍ24 household debt solution report
The Korean government is expected to introduce a new DTI (total debt repayment ratio) from next year to block additional loans from multifamily residents. Besides, DSR (total repayment ratio) will be introduced early next year, and the loan is expected to be tightened before the household loan examination. Through this, the Korean government plans to reduce the household debt growth rate to less than 8% per year to induce soft landing. Especially, strengthening regulations on real estate leasing companies will strengthen the financial support for vulnerable borrowers, such as insolvent households and livelihood self-employed, instead of blocking the so-called `gap investment`.
The Ministry of Strategy and Finance, the Financial Services Commission, the Financial Supervisory Service and the Ministry of Land, Infrastructure and Transport announced the comprehensive measures for household debt.
First of all, the government plans to introduce new DTIs following the 8 & 2 real estate measures and effectively block additional loans from multinational residents. Therefore, the new DTI will be implemented in January next year, which will assess income more accurately than the existing DTI and include the principal amount of the existing mortgage loan in the case of debt principal.
With the implementation of the new DTI, multi-lenders with more than two mortgage loans are expected to effectively stop further loans. If people get a mortgage loan, the DTI is above 30% on average, so no additional loans are possible. According to the government`s 8 ？ 2 real estate policy, households that already have a mortgage loan from the 23rd will not be able to receive mortgage loans in speculative areas such as Seoul Gangnam and 11 districts such as Seoul and Sejong.
In the government or financial sector, the introduction of the new DTI is expected to greatly reduce the `gap investment`, which is being abused as a means of securitization by multi-lenders. Gap investment is aimed at profit based on buying a house with a small lease of money and a lease on a high preselected value.
In the second half of next year, DSR will be introduced sooner than the DTI. DSR sets the loan limit for all loans, not only mortgage loans but also minus account books and auto installment finance, at a yearly rate, and evaluates future income forecasts.
Also, the Korean government plans to curb the growth of self-employed lenders by strengthening monitoring and regulation of group self-employed loans and real estate leasing companies in the second financial sector, which has recently been on the rise. From next year, the guarantee limit of HUG`s housing loan guarantee will be reduced from KRW 600 million to KRW 500 million in Seoul metropolitan area, metropolitan area and Sejong, and the guarantee ratio of HUG and Housing Finance Corporation will be further reduced from 90% to 80%. The government is planning to reduce the annual household debt growth rate, which exceeded KRW 1.40 trillion, by 0.5 to 1.0 % point to within 8.2 % of the average growth rate over the past 10 years (2005 to 2014). The current yearly increase in household debt will be reduced by KRW 10 trillion to KRW 20 trillion rather than the current trend, and the government will manage the balance of household debts at the end of the year from KRW 145 trillion won to KRW 146 trillion.
Instead of blocking lending to multi-lenders, the government will rather extend financial support to vulnerable households and livelihood self-employed. First, it will support fragile households with insufficient reimbursement capacity by reducing the delinquent interest rate of 6 ~ 9% to 3 ~ 5% and small overdue receivables with less than KRW 10 million. It is a policy to incinerate using contribution and donation. For the self-employed of the living, the company plans to introduce customized countermeasures such as launching `Hana Li` loans worth KRW 1.2 trillion for the Chinese economy and expanding the lending of policy funds. Kim Dong-yeon, the deputy prime minister and planning and finance minister, stated, "We will steadily promote the household debt issue over time so that the problem of household debt cannot be resolved in a short period of time. We will induce a gradual soft landing. And will encourage active participation in economic activities."
By Kim Dong Wook east@
[ copyright ⓒ The Digitaltimes ]
The Korean government is expected to introduce a new DTI (total debt repayment ratio) from next year to block additional loans from multifamily residents. Besides, DSR (total repayment ratio) will be introduced early next year, and the loan is expected to be tightened before the household loan examination. Through this, the Korean government plans to reduce the household debt growth rate to less than 8% per year to induce soft landing. Especially, strengthening regulations on real estate leasing companies will strengthen the financial support for vulnerable borrowers, such as insolvent households and livelihood self-employed, instead of blocking the so-called `gap investment`.
The Ministry of Strategy and Finance, the Financial Services Commission, the Financial Supervisory Service and the Ministry of Land, Infrastructure and Transport announced the comprehensive measures for household debt.
First of all, the government plans to introduce new DTIs following the 8 & 2 real estate measures and effectively block additional loans from multinational residents. Therefore, the new DTI will be implemented in January next year, which will assess income more accurately than the existing DTI and include the principal amount of the existing mortgage loan in the case of debt principal.
With the implementation of the new DTI, multi-lenders with more than two mortgage loans are expected to effectively stop further loans. If people get a mortgage loan, the DTI is above 30% on average, so no additional loans are possible. According to the government`s 8 ？ 2 real estate policy, households that already have a mortgage loan from the 23rd will not be able to receive mortgage loans in speculative areas such as Seoul Gangnam and 11 districts such as Seoul and Sejong.
In the government or financial sector, the introduction of the new DTI is expected to greatly reduce the `gap investment`, which is being abused as a means of securitization by multi-lenders. Gap investment is aimed at profit based on buying a house with a small lease of money and a lease on a high preselected value.
In the second half of next year, DSR will be introduced sooner than the DTI. DSR sets the loan limit for all loans, not only mortgage loans but also minus account books and auto installment finance, at a yearly rate, and evaluates future income forecasts.
Also, the Korean government plans to curb the growth of self-employed lenders by strengthening monitoring and regulation of group self-employed loans and real estate leasing companies in the second financial sector, which has recently been on the rise. From next year, the guarantee limit of HUG`s housing loan guarantee will be reduced from KRW 600 million to KRW 500 million in Seoul metropolitan area, metropolitan area and Sejong, and the guarantee ratio of HUG and Housing Finance Corporation will be further reduced from 90% to 80%. The government is planning to reduce the annual household debt growth rate, which exceeded KRW 1.40 trillion, by 0.5 to 1.0 % point to within 8.2 % of the average growth rate over the past 10 years (2005 to 2014). The current yearly increase in household debt will be reduced by KRW 10 trillion to KRW 20 trillion rather than the current trend, and the government will manage the balance of household debts at the end of the year from KRW 145 trillion won to KRW 146 trillion.
Instead of blocking lending to multi-lenders, the government will rather extend financial support to vulnerable households and livelihood self-employed. First, it will support fragile households with insufficient reimbursement capacity by reducing the delinquent interest rate of 6 ~ 9% to 3 ~ 5% and small overdue receivables with less than KRW 10 million. It is a policy to incinerate using contribution and donation. For the self-employed of the living, the company plans to introduce customized countermeasures such as launching `Hana Li` loans worth KRW 1.2 trillion for the Chinese economy and expanding the lending of policy funds. Kim Dong-yeon, the deputy prime minister and planning and finance minister, stated, "We will steadily promote the household debt issue over time so that the problem of household debt cannot be resolved in a short period of time. We will induce a gradual soft landing. And will encourage active participation in economic activities."
By Kim Dong Wook east@