Financial Services Commission Likely to Delay Release of Fractional Mortgage Roadmap
Policy Pushed Down the Priority List Under New Administration
Recent Surge in Seoul Housing Prices Adds to the Burden
The implementation of the fractional mortgage (housing finance) policy, which was expected to provide opportunities for homeownership with small amounts of capital through government financial support, is not likely to proceed smoothly for the time being.
According to the financial sector on June 19, the Financial Services Commission has decided to delay the release of the fractional mortgage roadmap, which was originally scheduled for this month. Even at the National Policy Planning Committee's financial sector briefing held in Sejong on this day, the current status of the fractional mortgage policy will not be announced.
The fractional mortgage is a system in which policy financial institutions, such as the Korea Housing Finance Corporation (KHFC), participate as equity investors in individuals' home purchases, thereby alleviating the loan burden for buyers. For example, if a house costs 1 billion won, an individual can own the home by combining 100 to 200 million won of personal funds, 300 to 400 million won in bank loans, and 500 million won in equity investment from KHFC. Kim Byunghwan, Chairman of the Financial Services Commission, announced a plan to promote the fractional mortgage policy containing these details in March. At that time, Chairman Kim stated that the policy was being considered as part of efforts to manage the rapidly increasing household debt, and that a pilot project would be pursued following the roadmap's release in June.
However, the atmosphere has changed significantly since the inauguration of the Lee Jaemyung administration. There is a prevailing view that, due to the many urgent financial issues related to the new administration's campaign pledges, the promotion of the fractional mortgage policy will be pushed down the list of priorities. The Financial Services Commission is expected to focus its briefing at the National Policy Planning Committee's financial sector meeting, scheduled for the afternoon of this day, on the implementation plans for major financial pledges of the new administration, such as debt restructuring for the self-employed and financial support for low-credit individuals. An official from the Financial Services Commission explained, "With the new administration taking office, there are many tasks that must be addressed as a priority, so it will be difficult to release the fractional mortgage roadmap for the time being."
The recent sharp rise in housing prices, particularly in Seoul, is another factor delaying the promotion of the fractional mortgage policy. According to the Korea Real Estate Board, the comprehensive housing sales price in Seoul rose by 0.38% in May compared to the previous month. The rate of increase also rose by 0.13 percentage points, from 0.25% the previous month. Since the beginning of this year, apartment prices in major areas of Seoul have been setting new record highs almost daily. In this situation, the introduction of the fractional mortgage policy could be misunderstood as fueling further housing price increases.
Due to these concerns, there have been voices in the market opposing the introduction of the fractional mortgage. The Citizens' Coalition for Economic Justice (CCEJ) argued that the introduction of the fractional mortgage by the Financial Services Commission should be withdrawn, as the release of policy funds into the market could have the effect of supporting housing prices. A CCEJ official emphasized, "Introducing the fractional mortgage is tantamount to a silent pressure to buy a house quickly and make money, as real estate prices will continue to rise," adding, "Policies that support housing prices, including the fractional mortgage, should be scrapped."
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