The pressure on the deregulation of loans

The financial authorities preparing for the ‘progression of household debt’ are worried about the pressure of the ruling party to ease the loan regulation. The ruling party, which lost in the April 7 re-by-election, is told to undo real estate loan regulations, but this is in line with the stance of tightening loans. If the party is 폰테크 dragged to the level required, the measures to stabilize household debt may be confused.

According to the National Assembly and the financial sector on the 14th, the Financial Services Commission will soon finalize and announce plans to manage household debt discussed at the meeting of related ministers held last week under the presidency of Hong Nam-ki, Deputy Prime Minister and Minister of Strategy and Finance.

The problem is that the financial authorities are twisting the steps of the Democratic Party of Korea, asking them to resolve regulations on real estate loans for young and homeless people every day.

The party’s demands were intensified as the cause of the election defeat was analyzed as failures in real estate policy and the departure of the younger generation. Choi In-ho, a senior spokesman for the Democratic Party, recently said, “The measures for non-residents, young people, newlyweds, and workers should be more detailed.”

Democratic Party lawmaker Song Young-gil, who is running for the next party’s presidential election, went further: for the first home buyer in his life, he asked for bank loans up to 90% of house prices. “For the first homeless person who has his own house, LTV, DTI should be released to 90% so that he can buy a house right away.”

This is in line with the financial authorities’ attempt to advance household debt in the first place. The financial authorities’ stable management of household debt is based on a “loan” system. This is because the household debt growth rate has fallen sharply, with the balance of household loans in the banking sector exceeding 1,000 trillion won.

The financial authorities have planned to make a soft landing of household loans, which soared nearly 8 percent last year, to 4 percent, the level before the Corona 19 (COVID-19) outbreak in 2022. There was also the intention to keep up the price of the house, despite 25 measures.

To this end, the financial authorities have been planning to apply the DSR (total debt repayment ratio) to individual borrowers (who borrow money). Currently, the average DSR for each bank is set at 40%, so some borrowers can take over 40% of the loans, but they will not exceed 40% for each individual in the future. However, it is also intended to soften regulations on young people and homeless people.

However, from the by-election, the deregulation required by the ruling party has become a “no-deal” and the indiscriminate deregulation of young and homeless people reduces the policy effect. Right now, half of Seoul’s total population is homeless. If the exception is 50%, the policy will be reduced to half.

There is also a problem of equity with 3040 households or single-family buyers who can not benefit from deregulation measures. If preferential treatment for young people and homeless people spreads due to conflicts between generations and classes, the acceptability of regulation will inevitably fall.

Financial authorities are also worried that excessive deregulation can give the market a wrong signal. Although it is a target for certain classes such as young people and homeless people, excessive regulation of loans can lead to an increase in real estate demand and a reversal of house price stabilization.

It is also the reason why the chairman of the finance committee, Eun Sung-soo, said, “Whenever there is an opportunity, it is conflicting to reduce household debt steadily and to apply regulations flexibly to actual buyers such as young people and newlyweds.”The troubles have doubled since the by-election

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