[10·26 Debt Measures] Strengthen Protection for Real Buyers but Activate 'Plan B' if Management Fails

Measures to Protect Ordinary Citizens and Actual Users and Implementation Schedule

[Asia Economy Reporter Park Sun-mi] While the financial authorities have prepared a plan to strengthen household debt management, focusing on the early implementation of borrower-level DSR phases 2 and 3, they have also decided to enhance protection for low-income and genuine borrowers by allowing exceptions and expanding support for restrictive regulations on genuine demand. Instead, if the household loan growth trend continues to expand, they plan to activate a 'Plan B' by strengthening DSR management standards to keep next year's household loan growth rate within the '4-5%' range.

The household debt management plan announced on the 26th by the Financial Services Commission and the Financial Supervisory Service includes various exception recognitions and preferential treatments for genuine demand to minimize damage to low-income groups during the household debt management process. First, jeonse loans handled in the fourth quarter will be excluded from the total volume limit. They plan to strengthen loan screening to ensure funds are supplied mainly to low-income genuine borrowers by allowing loans within the increase range for jeonse renewal (same housing), prohibiting jeonse loans (jeonse deposit secured loans) after moving in, and restricting non-face-to-face loans for one-homeowners.

Also, to prevent cases of suspension of balance payments loans due to total volume regulation, a joint 'Move-in Project Site Inspection TF' (Financial Services Commission, Financial Supervisory Service, Banks Association, etc.) will monitor and share information on projects at risk of difficulties in balance payment loans.

From November, exceptions and support expansions for restrictive regulations on genuine demand will also be promoted. When credit loans are limited to one times the annual income, temporary exceptions will be applied to allow exceeding the limit for genuine needs such as marriage, funerals, and surgeries for a certain period. They also plan to promote substantial use of the right to request interest rate reductions and continue to expand the supply of mid-interest and low-income financial products for low-income and vulnerable groups.

The financial authorities will activate 'Plan B' if the announced household debt management strengthening plan fails to take effect and the household debt growth continues excessively.

Measures such as additional adjustments to the average DSR of financial companies, high DSR, and borrower-level DSR regulatory ratios, as well as further expansion of the borrower-level DSR application targets, are expected to follow. For jeonse loans, measures such as applying the principal of jeonse loans to DSR when additional loans are taken after handling or introducing income and repayment ability criteria when calculating the guarantee limit for jeonse loans may follow. Assuming a rising interest rate situation, setting loan limits and inducing fixed-rate loans will also accompany these measures.

The financial authorities' target for next year's household debt growth rate is '4-5%'. Since the gap between last year's household debt and GDP growth rate (hereinafter 'GDP gap') recorded an all-time high of about 7.5 percentage points, they plan to gradually reduce the 'GDP gap' during 2021-2022 to bring the average 'GDP gap' from 2020 to 2022 close to the pre-COVID-19 average level.

A financial authority official said, "However, we plan to respond flexibly by fine-tuning management targets while observing next year's real economy trends, asset market changes, and financial market trends," adding, "In addition, we will manage meticulously to prevent inconvenience to genuine borrowers such as loan suspensions through solidifying the loan management system of financial companies."