[Financial Services Commission Report] Up to 40-Year Ultra-Long-Term Mortgage to Be Introduced

Financial Services Commission Announces 2021 Work Plan
Pilot Implementation in Second Half Targeting Youth and Others

Eun Sung-soo, Chairman of the Financial Services Commission

[Asia Economy Reporter Kim Hyo-jin] Financial authorities are introducing long-term mortgages of up to 40 years. The Financial Services Commission announced its 2021 work plan containing this content on the 19th.

At a briefing on the work plan held the previous day, Eun Sung-soo, Chairman of the Financial Services Commission, said, "There is a saying, 'How can you buy a house with just a loan?'" and added, "It is time to consider introducing 30- and 40-year mortgages so that if you pay monthly rent for 30 or 40 years, you can eventually own your own home."

The financial authorities plan to review and aim to introduce such 'ultra-long-term policy mortgages' in the second half of this year. Depending on the real estate market situation, they plan to pilot the program targeting youth, newlyweds, and first-time homebuyers.

Chairman Eun added, "We will create a system that allows young people to own homes and achieve housing stability with their current income."

He also explained, "People say, 'How can youth borrow money when they have no income?' but for youth, we are considering a more flexible and realistic approach than the existing Debt Service Ratio (DSR)."

DSR is the ratio of the annual principal and interest repayment amount of all household loans to annual income.

The Financial Services Commission plans to change the current DSR management method by financial institutions to a borrower-based repayment ability assessment (applying a uniform DSR of 40%) and revise the DSR calculation method to reflect the borrower's actual repayment ability. This plan is expected to be announced within the first quarter.