Remaining 15 Trillion Won of Anshim Conversion Loans to Transfer to Special BoGeumjari Loan

Integrated Management of Remaining Anshim Conversion Loans
Helps Meet Fixed Interest Rate Demand
4% Range Interest Rate and Early Repayment Fee Waiver Are Key Factors

[Asia Economy Reporter Kwon Hyun-ji] Approximately 15 trillion KRW of the remaining supply from the Ansim Conversion Loan, which ended in failure late last year, will be transferred to the Special Bogeumjari Loan. It is expected to attract more real demand borrowers looking to reduce interest costs amid rising rates. The Special Bogeumjari Loan is a fixed-rate policy mortgage product with an annual interest rate in the 4% range, scheduled to launch at the end of this month.

According to the Korea Housing Finance Corporation on the 10th, the Special Bogeumjari Loan will operate by integrating the remaining portion of the Ansim Conversion Loan’s target supply. The Ansim Conversion Loan ended having achieved only about 38% (9.4787 trillion KRW) of its 25 trillion KRW target due to stringent requirements. The remaining supply amount is 15.5213 trillion KRW. A representative from the Housing Finance Corporation stated, "About 15 trillion KRW remaining after operating the Ansim Conversion Loan will be transferred to the supply scale of the Special Bogeumjari Loan."

The Special Bogeumjari Loan is a concept that integrates three policy financial products: the Ansim Conversion Loan, which converts variable-rate mortgage loans to fixed-rate; the Eligible Loan (long-term fixed rate); and the Bogeumjari Loan (low-interest fixed rate). It will be operated temporarily for one year this year to reduce the interest burden on mortgage loans caused by rising interest rates.

[Image source=Yonhap News]

As the Special Bogeumjari Loan absorbs the remaining supply of the Ansim Conversion Loan, it is expected to help meet demand for switching to fixed rates. Compared to the previous Ansim Conversion Loan, the Special Bogeumjari Loan significantly lowers the loan eligibility threshold, so the number of applications is expected to increase relatively. The combined income requirement for couples, which was 100 million KRW, has been removed, and the housing price criterion has been raised from 600 million KRW to 900 million KRW. The loan limit has also been significantly increased from 360 million KRW to 500 million KRW.

However, the relatively higher interest rate compared to the Ansim Conversion Loan is expected to be a variable factor. Since the Ansim Conversion Loan performed poorly even at an annual interest rate of 3.7%, it is difficult to predict the success of the Special Bogeumjari Loan, which is expected to have a rate in the high 4% range. Whether early repayment fees will be waived has not yet been decided. The Financial Services Commission plans to announce the application and reception methods on the 11th, aiming to implement the Special Bogeumjari Loan by the end of this month.

Meanwhile, according to the Korea Housing Finance Corporation Act, funds for products such as the Ansim Conversion Loan and the Special Bogeumjari Loan are raised by the Housing Finance Corporation issuing mortgage-backed securities (MBS) based on its capital contributions. The target supply amount is set as the maximum forecast amount of MBS issuance. MBS issuance is legally managed within 50 times the capital (preferably within 40 times). This year, the Financial Services Commission decided to invest 166.8 billion KRW in the Housing Finance Corporation to operate the Special Bogeumjari Loan.