Financial Authorities Review Limits on Loan Extensions for Multi-Home Owners Holding Apartments in Regulated Areas such as Seoul

Reviewing Stronger Restrictions on Loan Maturity Extensions and Refinancing
Moving Beyond RTI Rules as President Lee Orders Additional Measures

Financial authorities are reviewing measures to restrict maturity extensions and refinancing of loans for multiple-home owners who hold apartments in regulated areas such as Seoul and the greater metropolitan area. This follows President Lee Jaemyung's call for stronger measures on residential landlords than the current regulation based on the ratio of rental income to interest payments (RTI) on an annual basis.

According to financial authorities on February 21, the Financial Services Commission is examining ways to restrict the automatic extension of loan maturities and refinancing for multiple-home owners who own several apartments in regulated areas, including Seoul.

An official from the financial authorities said, "Following the banking sector, we are now swiftly identifying the loan status of individual multiple-home owners and residential landlords in the secondary financial sector," adding, "It is highly likely that we will move in the direction of strengthening loan regulations on multiple-home owners, focusing on apartments in regulated areas."

In the case of loans to residential landlords, the proportion of non-apartment properties is high, and a blanket regulation could cause policy side effects. Taking this into account, the financial authorities are reviewing ways to minimize side effects through a "targeted regulation" approach that focuses on apartments in regulated areas.

This move comes after President Lee repeatedly urged the financial authorities to come up with more proactive measures regarding loans to multiple-home owners. On February 20, President Lee wrote on X (formerly Twitter), a social networking service (SNS), "Why are you only considering RTI regulations?" and added, "Wouldn't it be fair if loan extensions or refinancing for existing multiple-home holdings were subject to the same loan regulations as those applied to the purchase of additional homes by multiple-home owners?"

Previously, just before the Lunar New Year holiday on February 13, he also remarked, "We have given them several years of opportunities, even cutting capital gains tax, yet multiple-home owners have held on without reducing their holdings. Is it fair to grant them additional benefits of loan extensions when their loans reach maturity?" After the financial authorities began reviewing the strengthening of RTI regulations, he demanded even tougher measures.

In this context, President Lee further stated, "If completely unwinding the loans all at once would be too much of a shock, we could at least introduce a minimum transition period, such as requiring 50% to be resolved within one year and 100% within two years, and implement it gradually."

The Financial Services Commission is currently considering various options, including a measure under which, in the loan maturity extension review process for residential landlords, the RTI in regulated areas must exceed 1.5 times for the loan to be extended.

Another official from the financial authorities explained, "We are currently at the stage of reviewing multiple options," and added, "Once we complete our assessment of the current situation, we plan to consult with relevant ministries such as the Ministry of Land, Infrastructure and Transport."

The Financial Services Commission plans to include provisions on tightening loan regulations for multiple-home owners in its forthcoming household debt management plan. The announcement was initially scheduled for next week, but it is reported that, if the fact-finding process takes longer, the timing could be pushed back to early March.