[Debt Again] ② The 2030 Leading the 'Lion'... Government That Lowered Loan Barriers 'Watching Closely'

Will the Young Yeongkkeuljok Revive?
4 out of 10 Seoul Home Buyers Are Aged 30 or Younger
Impact of Interest Rate Cuts, Housing Price Recovery, and Government Policies

[Image source=Yonhap News]

Will the 'Younggeuljok' who dream of owning their own home make a comeback? As interest rates are lowered and the housing market outlook improves, the 'buying' trend among those in their 20s and 30s continues. With the lowest mortgage loan rates at commercial banks dropping to the 4% range, the burden of interest rates has eased. As of the 19th, the variable mortgage loan rates at the five major banks (KB Kookmin, Shinhan, Hana, Woori, NH Nonghyup) ranged from 4.23% to 6.12%, and fixed rates ranged from 4.06% to 5.82%.

Housing prices have also rebounded, mainly in the metropolitan area. According to the Korea Real Estate Board's 'May Nationwide Housing Price Trend Survey,' apartment prices in Seoul and Incheon rose by 0.01% and 0.04%, respectively, compared to the previous month. This marks an upward trend for the first time in 1 year and 3 months since prices started to decline in February last year.

Demand-driven buyers led by those under 30

The 20s and 30s age groups responded first to this trend. This can be seen from the Korea Real Estate Board's 'Apartment Sales Transactions by Buyer Age Group.' In April this year, out of a total of 2,981 apartments sold in Seoul, 38.7% (1,156 units) were purchased by those aged 30 or younger. This is the highest proportion among all age groups. It is the first time since April last year (42.30%) that the share of buyers aged 30 or younger exceeded 38%. The same trend was observed in the metropolitan area. In April, there were a total of 9,218 apartment sales in Gyeonggi Province, with those aged 30 or younger accounting for 34.8% (3,211 units).

The government's easing of loan requirements also played a role. The Korea Local Tax Research Institute analyzed, "Apartment purchases by those in their 30s, centered on actual demand, have increased," and added, "It appears that those in their 30s who could not purchase homes during the rapid price surge caused by COVID-19 bought homes following the government's relaxation of loan regulations."

Since the second half of last year, financial authorities have allowed a loan-to-value ratio (LTV) of up to 80% for first-time homebuyers and increased the loan limit from 400 million KRW to 600 million KRW. This year, the Special Bogeumjari Loan has motivated young people to buy homes. When purchasing a home priced at 900 million KRW or less, borrowers can take out up to 500 million KRW at a fixed interest rate. Most importantly, the loan does not apply the DSR (Debt Service Ratio) regulation, which was the biggest obstacle to borrowing, gaining popularity among the youth.

Interest rates and housing prices remain uncertain; caution advised

Since risks still lurk, banks advise caution against excessive borrowing. A representative from a commercial bank said, "Although the decline in housing prices has slowed, the direction is still uncertain. If the FOMC (Federal Open Market Committee) raises the benchmark interest rate, the Bank of Korea is also likely to raise its base rate," adding, "In such an uncertain situation, purchasing a home with excessive loans should be approached carefully."

As household debt continues to rise, financial authorities are also showing concern. Since 2021, the authorities have limited total loan amounts for banks and imposed strict measures such as applying a DSR of 40% (50% for non-bank sectors) for loans exceeding 100 million KRW, leading efforts to curb household debt. However, as regulations were eased to facilitate a soft landing of the real estate market, the risk of increased borrowing has reemerged. A financial authority official said, "We are closely monitoring the rebound in household loans."