Regulatory Zone Inclusion Apartment Balance Loan 'Existing LTV Application' Exception Clause Under Review

Supplementary Measures Following the June 17 Policy

[Asia Economy Reporter Kangwook Cho] Financial authorities are set to introduce supplementary measures related to balance payment loans less than a month after announcing the June 17 real estate policy. These supplementary measures, expected to include exceptions and relaxations, are likely to be announced at the 10th Emergency Economic Central Countermeasures Headquarters meeting, possibly as early as the 10th.

According to financial circles on the 9th, the financial authorities are considering preparing an exception clause that applies the existing Loan-to-Value ratio (LTV) to apartment buyers in areas newly designated as regulated regions under the June 17 policy. This supplementary measure comes in response to complaints from apartment buyers in the newly regulated areas who are facing difficulties due to unexpected reductions in loan limits. It means providing relief by applying the 'previous LTV' to cases where apartments were purchased before the June 17 policy announcement but the area was later included in the regulated zone or where the regulatory threshold was raised, resulting in a lower LTV for balance payment loans.

A financial authority official said, "We are reviewing the application of previous regulations to balance payment loans, but further discussions with other ministries are needed," adding, "After consultations between the ruling party and the government, the announcement could be made at the Emergency Economic Central Countermeasures meeting, possibly as soon as tomorrow."

The LTV for houses priced under 900 million KRW (based on market price) is 70% in non-regulated areas, but it drops to 50% in adjusted target areas and 40% in speculative overheating districts. For example, when purchasing a house priced at 600 million KRW, loans up to 420 million KRW are available in non-regulated areas, but if designated as a speculative overheating district, the loanable amount drastically decreases to 240 million KRW, making it difficult for actual buyers to secure balance payment loans, which has led to ongoing criticism.

Additionally, measures to ease or increase the LTV surcharge (currently 10 percentage points) for low-income and actual buyers within regulated areas are also being discussed. In adjusted target areas, low-income and actual buyers who are household heads without a home, with a house price of 500 million KRW or less, and a combined annual income of 60 million KRW or less (70 million KRW or less for first-time buyers) currently receive an additional 10 percentage points on the LTV. In speculative and speculative overheating districts, if the house price and annual income meet the criteria of 600 million KRW or less and 70 million KRW or less (80 million KRW or less for first-time buyers), respectively, they receive an LTV surcharge accordingly.