The financial authorities are struggling with a plan to block jeonse loans after Chuseok. They believe that some of the jeonse loans are being used for speculative purposes, so they are planning to come up with a limiting measure, but there are concerns about damage to end-users.
An official from the Financial Services Commission said on the 7th, “The increase in jeonse loans is high, so we are considering ways to limit it.”
Currently, the interest rates on mortgages and credit loans have soared to the 3-4% range due to the Bank of Korea’s increase in the base rate and market interest rates, but the interest rate on jeonse loans is relatively low at 2%.
Accordingly, financial authorities are suspicious of the possibility of investing in stocks or cryptocurrencies after receiving a jeonse loan with the lowest interest rate. Although the demand for Jeonse loan has decreased due to the recent enforcement of the 3rd Law on Leases, the loan growth continues.
Last year, the rate of increase in Jeonse loans was 33%, and the balance of Jeonse loans reached 150 trillion won. In addition, the cumulative increase in Jeonse loans by banks until July was 18 trillion won, which is 36.0% of the 51.4 trillion won increase in household loans in the banking sector.
Hong Nam-ki, Deputy Prime Minister of Economy and Minister of Strategy and Finance, implied de facto regulation of jeonse loans in a questionnaire to the National Assembly on the same day.
Deputy Prime Minister Hong said, “If Jeonse loans are operated as an exception to the limit of commercial banks, it will not work in the field.” Deputy Prime Minister Hong added, “We will discuss it with the Financial Services Commission Chairman, but it will not be easy in reality.”
Currently, the restrictions on jeonse loans include: ▲ multi-homeowners ▲ single-homeowners who own houses with a market price of more than 900 million won, and ▲ apartment owners with more than 300 million won in speculative areas and overheated speculation districts.
As most of the current buyers of jeonse loans are homeless, it is expected that the expansion of the jeonse loan regulations will directly affect the end-users of non-homeowners.
An official from the financial sector added, “Jeonse loans have been secured with secure housing such as apartments and villas, but if the scope of regulations is expanded, the damage to low-income households may increase.”
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