Financial Support for Supply, Lending Curbs for Demand... President Lee Reaffirms 'Targeted Policy' Approach

Expanding Project Financing and Redevelopment Funding, While Restraining Home Purchase Loans
Supporting Supply Activation, While Maintaining Household Loan Controls

President Lee Jae-myung announced that while financial support to back up housing supply will be expanded, regulations on household loans—which could stimulate demand for buying homes—will be maintained at current levels. This reiterates the government's targeted policy of proactively supplying funds to support housing on the supply side, while continuing to restrain household lending.

At a press conference held at the Blue House's main reception hall on the 18th, President Lee stated regarding real estate measures, "We are maximizing financial expansion in areas that can increase housing supply." He added, "We will maintain the existing loan policy on the demand side, which incentivizes buying."

President Lee Jae-myung is answering reporters' questions at a press conference held at the Blue House's main reception hall on the 18th. Photo by Yonhap News Agency

This means that the government intends to increase project financing (PF) and financial support for redevelopment projects aimed at boosting housing supply, but will not ease household loan regulations for home purchases. The aim is to ensure that funding does not become an obstacle in expanding supply, while also preventing household loan growth from fueling housing price hikes.

President Lee also identified past loan expansion policies as one of the reasons for rising home prices. He said, "Lack of supply, and then loan expansion—these various factors have contributed." He additionally cited the issue of excessive debt flowing into real estate.

This policy stance is in line with the "Comprehensive Financial Measures for Real Estate Market Stabilization" announced by the government last month. To promote housing supply, the government has decided to expand the size of real estate PF guarantees and financial support from KRW 26.3 trillion to over KRW 47.8 trillion plus alpha. This year, KRW 23 trillion and next year, KRW 33 trillion in PF guarantees will be supplied, and KRW 3 trillion from the KAMCO PF Normalization Fund will be used as seed money to support syndicate loans from the banking and insurance sectors totaling KRW 5 trillion. Industry self-funds will also be increased to KRW 10 trillion to support project normalization. New guarantee products for redevelopment projects and improvements to the loan-to-value (LTV) calculation for relocation loans are also being pursued.

On the other hand, the household loan management policy remains focused on controlling demand. Financial authorities plan to curb excessive home-related lending by strengthening oversight of jeonse (lump-sum deposit rental) loans, adjusting income calculation standards for the debt service ratio (DSR), and introducing tighter capital regulations for financial institutions.

However, given the need for housing supply and support for young people and genuine homebuyers, this year's management target for the annual growth rate of overall household debt has been adjusted from the previous 1.5% to around 3%. The increased lending capacity will be allocated for policy objectives including housing supply and housing stability for young adults. Rather than simply reducing the total volume of household lending, the authorities aim to balance both supply and restraint depending on the purpose of the funds.

Recently, although the overall pace of household loan growth has slowed, the increase in mortgage loans has accelerated again. According to the Financial Services Commission, household loans across all financial sectors increased by KRW 2.6 trillion last month compared to the previous month, a slower pace compared to the KRW 6.4 trillion increase in July. However, the growth in mortgage loans rose from KRW 3.6 trillion to KRW 4.3 trillion over the same period.

With this renewed acceleration in mortgage loan growth, financial authorities are expected to maintain a tight approach to household loan management for now. The authorities plan to continue ensuring adequate funding for necessary areas such as housing supply, while maintaining controls over the total volume of household loans on a per-institution basis. Thus, the two-track financial policy of managing supply-side and home buying funds separately remains in place.

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