[8.13 Real Estate Measures] Q&A: "Easing Total Loan Cap to 3%...More Breathing Room for Real Demand, Including Balance Loans"

PF Public Guarantees: 23 Trillion Won This Year, 33 Trillion Won Next Year
Expanded Financial Support for Housing Supply
"Youth Future Bogeumjari Loan" to Launch Next Year
Easing the “Marriage Penalty” for Newlyweds
Jeonse Loans for Youth and Newlyweds Raised to Maximum of 300 Million Won

In order to support housing supply, the government will expand the scale of public guarantees for real estate project financing (PF) from 23 trillion won this year to 33 trillion won next year. It is also raising this year’s target for household loan growth from 1.5% to 3.0%, thereby increasing the capacity to supply real demand funds, such as balance loans.

Shin Jinchang, Secretary General of the Financial Services Commission, is delivering a congratulatory address at the '2025 Asia Capital Investment Awards' held on December 4, 2025, at Lotte Hotel in Jung-gu, Seoul. Photo by Jinhyung Kang

To help young people buy their own homes, the government will introduce the “Youth Future Bogeumjari Loan” next January, which will apply a loan-to-value (LTV) ratio of up to 80% for non-apartment homes priced at 400 million won or less. In addition, the Bogeumjari Loan income requirement will be relaxed to allow cases where one spouse has an annual income of 70 million won or less, which alleviates the so-called “marriage penalty” for newlyweds.

For housing stability among young people and newlywed or child-rearing households, the limit for jeonse (long-term housing rental deposit) loans, including Youth Jeonse and Monthly Rent Combined Guarantee, will be raised to a maximum of 300 million won. Conversely, to curb speculative financial demand such as “gap investment,” jeonse loans for non-resident single-home owners who own apartments in the Seoul metropolitan area or regulated areas will, in principle, be banned.

The following is a Q&A with Jinchang Shin, Secretary General of the Financial Services Commission.

Q. The target for total loan growth has been drastically raised from 1.5% to 3%. Does this mean the mid- to long-term goal of reducing household debt to 80% of GDP by 2030 is being abandoned?

A. The goal remains unchanged. This year’s nominal growth rate is expected to be quite high. As the size of the economy grows, managing the increase in total household loans to around 3% should not hinder the long-term stabilization at the 80% level.

Q. Wasn’t the original 1.5% target set too tightly? What is the reason for the sudden upward revision, and when do you think the “open run” phenomenon in bank lending will settle down?

A. The situation now is completely different from when the 1.5% target was set. From April to May, expectations for temporary exemptions on capital gains tax led to a sharp increase in housing transactions, and the resulting asset market effects also drove a significant rise in credit loans. Since circumstances have changed, sticking to 1.5% could have increased public inconvenience; thus, we adjusted the target rationally. We plan to hold meetings with financial institutions soon. Once the market recognizes that the overall lending quota for both primary and secondary financial sectors has roughly doubled, the open runs and confusion on site should greatly subside.

Q. Which financial institutions are included in the “top 10 financial firms” mentioned in the measures? In addition, if youth loans increase, won’t HUG (the Korea Housing & Urban Guarantee Corporation) run out of available funds? Some suggest using the National Pension Fund instead.

A. The “top 10 financial firms” refers to the five major commercial banks and the five largest securities firms. The situation with HUG’s funds goes beyond our jurisdiction, but the youth loan products announced today will be handled by the Korea Housing Finance Corporation (KHFC), not HUG. KHFC’s guarantee capacity and fund soundness are both very solid. The idea of using the National Pension Fund has not been discussed and is not something I am able to respond to.

Q. The government says that moving expenses, interim payments, and balance loans will be “separately managed” from the total household loan quota. Will separate caps be set by loan category? Also, how large is the target group for jeonse loan restrictions on non-resident single-home owners?

A. The key is to ease the tight funding situation for real demand borrowers. It is difficult to mechanically assign separate limits for moving expenses or balance loans. By expanding the overall quota to 3%, banks will have the flexibility to manage autonomously and flexibly, thus alleviating many difficulties on the ground. The specific method will be discussed with the Financial Supervisory Service and the banks. It is difficult to estimate the size of the target group for non-resident single-home owners, as it is practically impossible to precisely identify those among jeonse loan borrowers who have never resided in the relevant property.

Q. What was the standard for restricting the “Youth Future Bogeumjari Loan” to non-apartment homes priced at 400 million won or less? Shouldn’t there be exceptions for regions outside the capital area?

A. The price limit is set at 400 million won for both the Seoul metropolitan area and other regions. There are two reasons for this. First, to enable young people to buy homes paying principal and interest similar to the monthly rent they currently pay (850,000–1,000,000 won), the standard home price needs to be kept near 400 million won. Second, the average price of small officetels with good access to jobs and transportation, which young people prefer, is roughly 400 million won in Seoul and 300 million won across the metropolitan area. The limit reflects realistic prices and reasonable interest burdens.

Q. Won’t temporarily suspending PF capital requirements for residential project sites increase the risk of insolvency? Also, there are concerns that if prices of non-apartment homes decline, they would fail to serve as stepping stones for young people.

A. The core of PF-related insolvencies is concentrated in commercial and non-residential project sites in non-capital regions. We are temporarily waiving regulations only for “residential project sites,” which carry relatively lower risk and are urgently needed for housing supply. We recognize concerns over falling non-apartment prices, but if the government continues its measures to prevent jeonse fraud and restores market confidence, the situation could change. Whether individuals choose to keep paying sunk-cost monthly rent or, anticipating future price increases, purchase a non-apartment home is their decision. This must be viewed in the context of the broader market situation.

Q. Is the decision to raise the total household loan target simply a result of the recent surge in credit loans? Couldn't credit loans have been regulated independently?

A. As of now, there are no plans to separately manage only the total amount of credit loans. With the overall quota expanded from 1.5% to 3%, we expect each bank to allocate and manage within its expanded capacity appropriately and autonomously.

Q. In the new restriction on jeonse loans for non-resident single-home owners, are the “unavoidable circumstances” that qualify as exceptions determined at the financial company’s discretion?

A. The government cannot individually assess every situation. Circumstances where, for example, a landlord cannot return a deposit and thereby prevents the repayment of an existing jeonse loan, will be evaluated autonomously by the “Credit Review Committee” established at each bank since 2018, which will recognize exceptions as appropriate.

Q. The government plans to expand syndicate loans and KAMCO funds to normalize PF. However, these policies have been promoted before. Can they practically result in increased housing supply?

A. In the past, efforts were focused simply on raising funds, but now KAMCO will make subordinate investments and assign dedicated managers to each project site for close oversight. If there are licensing delays, we will resolve them immediately through consultation with the Ministry of Land, Infrastructure and Transport. Through such close management, we expect the pace of actual housing construction to exceed straightforward projections.

Q. If the overall loan quota doubles, does that mean the cap for each individual bank also doubles? Is there concern that easing income standards for Bogeumjari Loans will trigger a surge in policy loan demand?

A. The doubling of the quota refers to the overall size for both the primary and secondary financial sectors. However, the ceilings for individual banks may differ depending on each bank’s lending performance in the first half and whether any penalties have been imposed. The relaxed income standard for Bogeumjari Loans for newlyweds will take effect starting in October (Q4). Only the remaining three months of this year will be affected, so we expect the immediate impact on the total quota to be limited.

Q. The “Youth Future Bogeumjari Loan” is only available for non-apartment homes. Does this mean the government wants young people to live only in such dwellings? Why wasn’t the request raised at policy forums to increase the Bogeumjari Loan’s housing price cap to 600 million won accepted?

A. This is not about forcing young people into non-apartment residences. Those who want to buy apartments can use existing programs like the Didimdol Loan or the standard Bogeumjari Loan. The key point of the new product is that even after borrowing, the “first-time home purchase benefit” remains available. This is a true stepping stone. We will run the program for the next two years and, if the market response is positive, consider expanding coverage to apartments next year. We fully understand the demand to raise the cap on target home prices for the Bogeumjari Loan, but immediate acceptance is difficult due to fiscal constraints and concerns about stimulating housing prices. We ask for understanding that this is part of a process to establish a culture of purchasing a home with manageable debt levels over the long-term.

This content was produced with the assistance of AI translation services.