South Korean financial authorities are moving to restrict loan extensions for multi-homeowners in the greater Seoul area and other regulated regions, effectively curtailing access to further credit. The Financial Committee is scheduled to convene a third meeting on February 24th with representatives from the five major banks, as well as the National Credit Union and the Saemaul Credit Union, to discuss implementing the policy, according to reports from Yonhap News Agency.
The proposed measures would apply the same 0% loan-to-value (LTV) ratio currently in place for new loans to any extensions or refinancing of existing mortgages for multi-homeowners in these areas. This would effectively force borrowers to repay outstanding loans rather than roll them over, a move described by officials as a means of “loan recovery.”
The shift in policy comes amid increasing pressure from President Lee Jae-myung, who has repeatedly criticized financial benefits afforded to multi-homeowners. Financial regulators are reportedly developing a “pinpoint” strategy, focusing initially on multi-homeowners possessing apartments in the Seoul metropolitan area and other regulated zones. But, officials acknowledge the necessitate for a nuanced approach, considering potential impacts on regional property markets and rental costs.
A task force within the Financial Supervisory Service has been analyzing multi-homeowner loan data across the financial sector, examining borrower types, loan structures, collateral, and regional distribution. In addition to tightening LTV ratios on loan extensions, the task force is too considering strengthening regulations related to debt service ratios (DTI).
The Financial Committee’s previous two meetings focused on assessing the current loan landscape and maturity structures. This upcoming meeting is expected to concentrate on concrete implementation plans for reducing the overall volume of loans extended to multi-homeowners. While a broad approach is being considered, authorities are signaling a willingness to adopt a regionally and property-type specific strategy, potentially offering exemptions or phased reductions in certain areas to mitigate market disruption.
